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Steel Industry: Globally and In India : Times to Come. Dr. A.S.Firoz. Issues In This Presentation. Overview of the global steel market Factors determining the future Indian steel market growth prospects Competitiveness. Externalities and constraints. Global Steel Market.

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Presentation Transcript
issues in this presentation
Issues In This Presentation
  • Overview of the global steel market
  • Factors determining the future
  • Indian steel market growth prospects
  • Competitiveness.
  • Externalities and constraints
global steel market
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
where is the global market heading

Where is the Global Market Heading?

Past trends are interesting

why global demand has risen
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
why global prices have risen
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
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

Will the Global Boom Continue?
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

Are We in 1960s or 1970s?
how do we see the world then
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
indian steel industry 1993 94
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
indian steel industry 1999 00
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
indian steel industry 2003 04
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
why is steel consumption low in india
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 (?)
what can lead steel demand growth
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
what can lead to high economic growth
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
not to forget the potential of
Not to forget, the potential of
  • Commercial and residential construction in Semi Urban Areas
  • Road Projects
  • Engineering and capital goods sector
strength of indian steel industry
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
strength of indian steel industry28
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
constraints and concerns
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 industry’s image in the capital market :selective support
  • Iron ore ownership : too fragmented
facilitating conditions
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)
concluding remark

Concluding Remark

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