INDIAN STEEL SECTOR OUTLOOK 2015

Steel Industry is more than 125 years old. The 110 million ton a year Industry in India is poised to grow to 300 million ton by 2025. That is around 10-11% growth..! Despite short term dip in demand following global price slip that pushed prices down to 47% following Chinese recession; the industry is going through a consolidation phase. Indian GDP is expected to grow between 7 to 9 percent over the next decade, a fact that has been accepted by most analysts. Growth in infrastructure, real estate, and automobile sectors is likely to increase the demand for steel in India.

Rural India: Hub for Steel Demand

The rural demand is currently estimated at 9 to 11 kgs per capita. This is estimated to grow to 20 to 23 kgs in next decade as per JPC rural market study based on alternate economic growth scenarios. The rural demand can be improved by improving logistics and supply chain. There is a requirement of quality pucca houses, community centers, health clinics and other infrastructure. Today, Kerala has the highest level of rural demand at 18.6 kg per capita. Smaller lots sizes and small finished steel producers can spike rural demands. Increasing consumption of white good, automobiles and infrastructure in rural areas too may spur rural demand for steel.

Steel Demand by Product Mix

It is important to know the pattern of market demand by products as production of flat products take a different equipment route in the manufacturing process than the long products. Economics of scale and logistics of production and shipment of flat products are different from long products. It is observed that as the economy matures and steel consumption improves share of total consumption in flat products rises.

Product wise share of steel demand forecast
(as percentage of total consumption of finished carbon/mildsteel)
Year/Category	2010-11	2016-17	2020-21	2025-26
Bars and Rods	39.3	39.9	40.2	40.2
Structural	9.0	7.6	6.8	5.8
Raillway.Materials	1.8	1.3	1.0	0.8
Total Long Products	50.1	48.8	47.9	46.8
Plates	7.7	7.0	6.5	5.9
HR Coils/Skelp/Sheet	21.0	20.9	20.7	20.4
(Excluding double accounting)
CR Coils/Sheet	9.7	11.4	12.7	14.5
(Excluding double accounting)
GP/GC Sheets	7.6	7.8	7.9	7.9
Electrical Sheets	0.8	0.8	0.8	0.8
Tin Plate/TFS	0.6	0.7	0.7	0.7
Pipes	2.5	2.7	2.8	3.0
Total Flat Products	49.9	51.2	52.1	53.2

This articles looks to explore the long term and strategic issues which the steel industry is likely to confront. There are positive factors to support the view that if the economy continues to grow and the GDP chalks the achievable target rate of 7 to 9% YoY; the steel consumption is likely to touch the levels of 300 million tonnes by 2025-26.

-Mr. Balasubramanium Ramachandran