PRLog (Press Release)– Apr 06, 2011– Indian steel and aluminium consumption will surge in the years ahead, but the ability of domestic industry to serve the market is being compromised by excessive delays in government approval, as well as social unrest.
In 2010, Indian crude steel output grew 16.4% year-on-year (y-o-y) to 66.17mn tonnes, with monthly output stabilising at around 5.7mn tonnes in H210, a historic high. Hot rolled output rose 7.6% to 61.12mn tonnes. However, production growth lagged the rate of growth in demand, with finished steel consumption growing 10.4% to 57.65mn tonnes. BMI believes production was undermined by a fall in car sales growth in H210. The main engine of the economy - domestic demand - will be fuelled by rising private consumption and chevrolet fixed investment levels, as well as the need to rebuild inventories. BMI expects the situation to stabilise in 2011 on the back of improvements in domestic demand and the industry's liquidity situation.
The rate of growth in both steel supply and demand is set to strengthen in years ahead as consumer demand remains buoyant and capacity continues to expand. India aims to become the second largest steel producing nation by 2012, with a targeted production capacity of 120mn tonnes per annum (tpa). The country also has immense scope to increase its consumption of steel. Current per-capita consumption is around 40 kg, compared with 100kg in Brazil, 250kg in China and a global average of 198kg. Steel demand is expected to rise in double digits annually for the next few years. India is expected to emerge as the third largest consumer of steel in 2011, after China and the US, supported by investment in infrastructure and strong growth in the automobile and consumer goods sectors. Demand in India will rise car news 15.8% in 2011 to 66.73mn tonnes, in contrast with the 5.3% growth expected in the international market.
The automotive sector will be a major force in driving finished steel sales in India and is fuelling the diversification of downstream industries and growth in speciality steels. Steelmakers are seeking to increase the value of production and raise margins by tapping into growth in the auto ferrari motive industry. With the Indian car market set to grow from just under 2mn units in 2010 to 3mn units by 2015, the potential for auto grade steel is considerable. Tata Steel currently holds a 40% share of the segment, with Essar representing a 20-25% share. Tata is set to consolidate its market position with the construction of a continuous annealing line in a joint venture with Japan's Nippon Steel. JSW Steel has tied up with Japan's JFE to set up a 10mn tpa auto steel line at its Vijayanagar steel plant. Its proposed 10mn tpa plant at West Bengal is earmarked for auto steel and value-added products.
India's per-capita consumption of aluminium is 1.3kg, offering huge potential for expansion. Increasing demand from the automotive industry should fuel growth in aluminium castings and the Aluminium Casters Association of India forecasts annual growth averaging 18% over the medium term, compared with 12% in recent years. This should spur investment in capacity throughout the supply chain. India is set to raise its annual aluminium output from an estimated 1.3mn tonnes in 2010 to 5mn tonnes by 2015, due to the massive capacity expansion programme. This would transform India into one of the world's top three aluminium producers. While there is potential for the country's aluminium production to grow to 10mn tpa by 2020, there are concerns that the pace of expansion could deplete domestic bauxite resources, leading the government to stress the need for resource conservation in addition to the exploration of new reserves.
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