Commodities | Oct 17 2006
By Chris Shaw
Much has been made of the impact China and its increases in production and exports has had on the global steel market, but India looks set to join it as a growing exporter of steel products in coming years.
A report by GFMS Metals Consulting suggests India is likely to experience a significant growth in steel production in response to an investment boom in the industry. The boom reflects both strong global prices for steel and strength in the domestic economy, which has led to significantly stronger demand.
Quantifying this higher demand, GFMS estimates the total net consumption of flat products in 2005 of 10.8m tonnes was a 37% increase from 2000, while consumption of long products has increased by 40% over the same period.
The group points out India has a number of factors in its favour in terms of being a low cost steel producer, including large iron ore reserves, low labour costs and an availability of metallurgical engineers, so significant capacity expansion appears a certainty. This is not without risk though, GFMS suggesting there is the risk of overcapacity if all the currently proposed projects were to come on-stream.
In its view such an outcome is unlikely as the industry would require overseas funding if all the new projects are to be developed as it simply could not raise the US$75bn required. This makes it most likely there will be some brownfields expansion and potentially two or three greenfields developments that eventually proceed.
GFMS estimates this will see crude steel output increase to 72.7m tonnes by 2011 for an annual rate of increase of more than 9%, while finished steel demand is forecast to increase by more than 8.5% annually, giving the country steel surplus to its requirements.
As a result the group expects Indian producers will be exporting more than 2.5m tonnes of slab annually by 2011, with total export of steel products of more than 11m tonnes. While this is well below the level of China’s exports, India is expected to be far more profitable given it enjoys a significantly lower cost base thanks to its domestic supplies of iron ore.