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Market Report, "India Metals Report Q3 2010", published
New Materials research report from Business Monitor International is now available from Fast Market Research
In Q110, India's crude steel output was up 20% year-on-year (y-o-y) to 16.1mn tonnes, reflecting the country's steady return to form since H209. The momentum appears to be sustainable, with monthly output remaining above 5mn tonnes for four successive months in March - the first time India exceeded this level was in December 2009. Expanding capacity meant that March represented a new high at 5.5mn tonnes.
Industry sources suggest that the level of consumption will exceed 10% over the next five years, driven by the construction, real estate and infrastructure sectors. In April 2010, consumption grew 9.6% y-o-y to 4.14mn tonnes and output grew just 5.3% to 4.9mn tonnes, leading to a 47.9% surge in imports to 660,000 tonnes. The automobile, household goods and capital goods industries also contribute substantially to the growth of the market. BMI forecasts average annual growth in finished steel consumption of 14% in 2010-2014. This is based on forecast average real GDP expansion of 7.6% per annum over the coming 10 years, ultimately driven by the Indian consumer. Increasing consumer sovereignty along with urbanisation will fuel demand in metals end-markets. By 2014, based on BMI's forecast model, finished steel consumption should reach 100mn tonnes, which is nearly twice the amount consumed in 2008 and only 6mn tonnes behind the US. Nevertheless, India will not catch up with Asian rival and global economic powerhouse China, whose consumption will be seven times larger.
In order to fulfil domestic demand, India will need to double capacity within the next five years. In response to the brightening outlook, steelmakers are re-launching projects that had been shelved in the wake of the global financial crisis, though progress is likely to remain slow. This prompted steel minister Virbhadra Singh to state in May 2010 that India would double steel production to at least 120mn tonnes by 2011/12 (previous government forecasts had estimated 124mn tonnes) even without the planned POSCO and ArcelorMittal projects. South Korea's POSCO is planning a greenfield project in Orissa with 12mn tonnes per annum (tpa) of steel production capacity, but it is held up by disputes over land acquisition. ArcelorMittal has also been unable to press ahead with a 12mn tpa project in Jharkhand due to similar problems. However, the government's targets are unrealistic, with BMI forecasting 87.5mn tonnes output by 2012 - an increase we regard as relatively optimistic. We base our forecast on planned new capacity being set up by private and public sector steelmakers, with total crude steel production capacity is estimated to increase to around 100mn tpa in 2012 and capacity utilisation around 90% by 2012. By 2014, crude output should be approaching the 100mn tonne mark.
Meanwhile, Indian aluminium producers are looking to China for growth amid a rebound in demand. However, BMI cautions that Chinese imports only grew in 2009 due to large amounts of capacity coming offline. Towards the end of 2009, producers such as Chinalco were ramping up production as idled capacity came back online at a time when global inventories were still high. We believe this could create a situation of over-capacity, although the lower cost of Indian production compared with Chinese smelting gives it a competitive advantage. Indian aluminium producers can produce aluminium at a cost of US$1,000-1,200 - half the cost of Chinese production - due to the country's plentiful bauxite resources. As such, Indian producers are in a better position to weather the economic downturn. Nevertheless, there remains significant danger of medium-term over-capacity due to projects pursued by the three major players, Hindalco, Vedanta Resources and Nalco.
For more information or to purchase this report, go to:
Partial Table of Contents:
- India Political SWOT
- India Economic SWOT
- India Business Environment SWOT
- Table: World's Top 10 Steel Producing Countries (mn tonnes)
- Table: Recently Added And Planned Smelter Capacity
- Commodities Forecast - Nickel To Average US$22,000/tonne In 2010
- Table: BMI Nickel Forecast
- Table: Nickel
- Market Strategy - Aluminium Update: Downside Risks To Average Price of US$2,100/tonne In 2010
- Table: BMI Aluminium Forecast
- Table: Aluminium
- Commodities Forecast - Gold To Average US$1,150/oz In 2010
- Table: BMI Gold Forecast
- Table: Gold
- Commodities Forecast - Copper
- Table: BMI Copper Forecast
- Table: Copper
- Table: Top 10 Asian Steel Producers, 2008
- Table: India's Metals Industry, 2007-2014 ('000 tonnes unless stated)
- Macroeconomic Forecasts
- Table: India - GDP By Expenditure, % Of GDP, 1992-2020
- Table: Aluminium Smelters In India, 2008
- Company Profiles
- National Aluminium Company (Nalco)
- Steel Authority of India Ltd (SAIL)
- Tata Steel
- Hindalco Industries Ltd
Global Assumptions - Q3 2010 Update
- Table: Global & Regional Real Gdp Growth (%)
- Table: Real Gdp Growth (%) - Consensus Forecasts
- Table: Global Assumptions
- Table: Developed States, Real Gdp Growth Forecasts
- Table: Emerging Markets Aggregate Growth
Country Snapshot: India Demographic Data
- Section 1: Population
- Table: Demographic Indicators, 2005-2030
- Table: Rural/Urban Breakdown, 2005-2030
- Section 2: Education And Healthcare
- Table: Education, 2002-2005
Full Table of Contents is available at:
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