http://www.dnaindia.com/money/report-china-india-steeling-up-the-marketplace-1400885

Steel: China ups production; India ups consumption

There’s a whirlwind of confusion within the Indian steel industry.  On the one hand, there is euphoria — demand for iron and steel continues to soar.

And India knows that it, along with China, will decide the fate of global steel markets in the future. On the other hand there is great uncertainty.

Nobody is sure about what the prices of steel or the raw materials that go into the making of steel will be like over the next few years.

Demand for steel is good news, but uncertainty about the price at which it can be sold can spell trouble.

First look at the causes leading to the euphoria.

The financial meltdown took the wind out of most developed markets. For two years successively, their production has dropped.

And it is not certain if 2010 will allow them to reach the production levels they had achieved in 2007.

India did see a marginal dip in production in 2009, but it was just marginal.  It bounced back in 2009, producing 56 million tonnes, and is likely to see production levels soar further this year.

India’s consumption growth continues to climb unabated.  “Look at the way India’s imports continue to surge ahead, while exports have begun to slow down,” sais Ashok V Bharadwaj, director, Ispat Industries, at a  MetalBulletin Steel conference in Mumbai last month.

The top 10 in 2009

2005 2006 2007 2008 2009 2010 Jan to Apr
China 355,790 422,660 489,899 500,312 567,842 213,263
Japan 112,471 116,226 120,203 118,739 87,534 35,498
Russia 66,146 70,830 72,387 68,510 59,940 21,370
United States 94,897 98,557 98,102 91,350 58,142 26,403
India 45,780 49,450 53,080 57,791 56,608 21,437
South Korea 47,820 48,455 51,517 53,625 48,598 18,024
Germany 44,524 47,224 48,550 45,833 32,671 14,800
Ukraine 38,641 40,891 42,830 37,279 29,757 11,038
Brazil 31,610 30,901 33,782 33,716 26,507 10,733
Turkey 20,965 23,315 25,754 26,806 25,304 8,476
World production 1,146,686 1,251,196 1,351,289 1,329,123 1,219,715 465,525
Source:WSA

This view is echoed by T S Sunderasan, secretary general of the Ferro Alloys Producers’ Association.  “India’s economy has been growing at 8-9%.  In January this year, the Index of Industrial Production (IIP) rose by 17.9% compared with the level in January 2009 .The growth rate for durables stands at 22% and automobile production at 17%.  But most important, infrastructure growth will add to the demand for steel manifold.  That is why the World Steel Association (WSA) expects India to become the third-largest producer of steel by 2013 (today it ranks fifth), if not earlier.”

These numbers could rise even further with the emergence of new towns and cities, and the building of better highways and railway networks. Not surprisingly, every industry analyst expects domestic steel production to virtually double from the current 57 million tonnes a year to 124 million tonnes by 2012.

More interestingly, India’s consumption growth is likely to overtake China’s growth rate.

“While India’s consumption of steel continues to soar at over 14% CAGR per annum, China’s consumption has slowed to 5%,” adds Bharadwaj.
This is lower than the 6% for all Brics countries, and even lower than the world growth rates.

What this means is that China will have more steel for export, so  expect market prices of steel to soften.  But that is where the uncertainty begins.

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Journalist. Educationist. Researcher Current activities include Journalism: was a full time journalist till 1998 when I was editor with one of the largest media groups in India. Education: Was a full time teacher and education administrator till 1982 (have taught and both undergraduate postgraduate levels) Research: undertake specific research projects in select areas.

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