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Steel Industry: Globally and In India : Times to Come

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Issues In This Presentation Overview of the global steel market Factors determining the future Indian steel market growth prospects ... labour force Strong managerial ... – PowerPoint PPT presentation

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Title: Steel Industry: Globally and In India : Times to Come


1
Steel Industry Globally and In India Times to
Come
  • Dr. A.S.Firoz

2
Issues In This Presentation
  • Overview of the global steel market
  • Factors determining the future
  • Indian steel market growth prospects
  • Competitiveness.
  • Externalities and constraints

3
Global Steel Market
  • Strong Demand Everywhere
  • Construction, auto leading growth
  • Huge increases in production
  • Shortages still perceived
  • Extraordinary increases in price of flat products
  • Metallics and raw materials in tight supply
  • Steel production costs up
  • Yet, profitability is at record high

4
Where is the Global Market Heading?
  • Past trends are interesting

5
Global Steel Production Growth Rates (CAGR )
6
Global Steel Production Trend
7
Why Global Demand Has Risen
  • Extraordinary growth in China
  • Low global inflation has led to increased savings
    and assets building
  • Relocation of industrial production to developing
    countries - reason for low inflation and global
    asset building
  • Infrastructure renewal in developed nations
  • New infrastructure in developing nations
  • Increased steel intensive construction in
    developing nations

8
Why Global Prices have Risen?
  • Demand pull
  • Supply constraints - not enough HR Coils capacity
  • Speculation amidst uncertainty
  • Increase in raw materials and metallics prices
    and huge price volatility
  • Consolidation of the steel industry and
    oligopolistic control of the individual domestic
    markets
  • High ocean freight costs
  • Lethargic markets

9
Will the Global Boom Continue?
  • Positives
  • China will remain strong
  • Global industrial relocation will gather momentum
  • Global capital will move to leading developing
    economies
  • Technology changes will favour steel in
    construction
  • Negatives
  • Global inflation up
  • Energy prices high
  • Recession may hit global economies
  • Raw materials and logistics will cost much more
  • High steel prices will lower its demand

10
Are We in 1960s or 1970s?
  • 1960s
  • Huge uninterrupted increase in steel demand
  • Massive infrastructure and industrial capacity
    building in the developed nations
  • Emergence of developing industrial nations
  • 1970s
  • Oil Crisis and Recession
  • Drop in Steel consumption growth
  • Beginning of Cyclicality

11
How do we see the world then?
  • Chinese steel appetite will reduce but will still
    be substantial
  • With curb on new capacity, Chinese steel
    production will slow down
  • Flat products demand to remain strong and supply
    constraints to continue for another two years
  • Coking coal will remain in tight supply
  • Raw materials costs, especially metallics, will
    keep long products prices up
  • Greater stability in the market with contract
    sales taking larger share
  • 5 growth in global steel demand expected for 3-5
    years

12
Indian Steel Industry (1993-94)
  • Production (Finished Steel) 15.2 million tonnes
  • Consumption (Finished Steel) 15.3 million
    tonnes
  • Imports ( Semis Finished ) 1.09 million
    tonnes
  • Exports ( Semis Finished) 1.56million tonnes

13
Indian Steel Industry (1999-00)
  • Production (Finished Steel) 29.7 million tonnes
  • Consumption (Finished Steel) 23.8 million
    tonnes
  • Imports ( Semis Finished ) 2.2 million tonnes
  • Exports ( Semis Finished) 3 million tonnes

14
Indian Steel Industry (2003-04)
  • Production (Finished Steel) 35.9 million tonnes
  • Consumption (Finished Steel) 29.9 million
    tonnes
  • Imports ( Semis Finished ) 1.61 million
    tonnes
  • Exports ( Semis Finished) 5.9 million tonnes

15
Growth Trends (CAGR )
16
Why Is Steel Consumption Low in India?
  • Low income economy
  • Low savings rate
  • Low industrial growth
  • Rural character of the economy
  • Unplanned urban growth
  • Inadequate infrastructure development
  • Low quality public assets
  • High inflation rates in the past
  • Late starter
  • High price of steel (?)

17
Steel Price and Per Capita Income
18
Big Mac Index
19
What Can Lead Steel Demand Growth?
  • High economic growth driven by industry
  • Industrial capacity building Increased attention
    to infrastructure Ports, Railways, Power
    Generation, Airports
  • Urban Infrastructure
  • Urban Commercial and Residential Construction
  • Consolidation of urban land ownership
  • Steel based construction
  • Low inflation
  • Increased asset building
  • Automobiles and components industry growth, also
    for world production

20
What can lead to high economic growth?
  • Administrative reforms and good governance
  • Political stability
  • Social stability
  • Reduced protection to industry
  • Low inflation
  • Land law reforms

21
Not to forget, the potential of
  • Commercial and residential construction in Semi
    Urban Areas
  • Road Projects
  • Engineering and capital goods sector

22
Domestic Steel Demand Projection (At 6 Rate of
Growth ) (Mill.tonnes)
23
Domestic Steel Demand Projection (Good Growth
Scenario ) (Mill.tonnes)
24
Domestic Steel Demand Projection (Strong Growth
Scenario ) (Mill.tonnes)
25
Projections of External Trade (Million tonnes)
26
Crude Steel Production Forecast (Million tonnes)
27
Strength of Indian Steel Industry
  • Abundant supply of iron ore
  • Low cost but reasonably efficient labour force
  • Strong managerial capability and improving labour
    productivity
  • History in steelmaking and acquired skill
  • Reasonable availability of other raw materials to
    back up
  • Strongly globalised Industry and emerging global
    competitiveness

28
Strength of Indian Steel Industry
  • Modern new plants
  • Modernised old plants
  • Strong DRI production base
  • Regionally dispersed merchant rolling mills
  • High Degree of Entrepreneurship
  • Strong Banking Industry and Capital Market for
    Investment
  • Reasonable Confidence of Foreign Investors
  • Stable Currency and Economic Policy Regime
  • Strong Judiciary and English Language Spread
  • Democratic Political System

29
Constraints and Concerns
  • Coking coal limited local supply
  • Energy cost to remain high
  • Infrastructure shortages everywhere
  • Scrap quality shortage
  • Iron ore supply logistics medium term problems
  • Steel industrys image in the capital market
    selective support
  • Iron ore ownership too fragmented

30
Facilitating Conditions
  • Infrastructure spending up ( although a long way
    to go !)
  • Infrastructure efficiency up ( only moderately
    till now )
  • Private sector and captive mining ( slow pace of
    state governments )
  • High growth in production in states with sea
    ports ( Karnataka and Orissa)

31
Concluding Remark
  • India can do it in steel and even much more than
    the best talked about!

32
THANK YOU Views expressed and the estimates shown
are personal
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