India, till now a net exporter of steel, is slowly becoming a net importer as the demand from the construction sector is growing at a fast pace.
Construction sector may consume over 55% of the domestic steel production by 2012
MUMBAI: India, till now a net exporter of steel, is slowly becoming a net importer as the demand from the construction sector is growing at a fast pace.
From the beginning of the financial year 2007-08 till date, the country has imported 3.6 million tonnes per annum (MTPA) of steel as against 2.9 MTPA of exports.
Experts say the trend is likely to continue for three to four years. R K P Singh, director general, Institute for Steel Development and Growth (INSDAG), Kolkata, while talking to DNA Money on the sidelines of 7th Asian Steel Conference, said: “The construction sector
will be the biggest driver of steel industry in India and other developing countries for the next 5-10 years.”
The total steel production capacity of the country is currently 45 MTPA. He said the sector would consume almost 50% of the total produce in the country and if the demand is not sufficed by domestic manufacturers, the sector would start importing.
“A shift towards import of steel has already started as the kind of products demanded by the sector is not manufactured abundantly in India,” Singh said.
Singh said the construction sector demands heavy structural steel with high tensile strength which is manufactured by only two major manufacturers in the country - Steel Authority of India Ltd (SAIL) and Jindal Steel and Power Ltd (JSPL).
“These two companies together don’t meet the demand of steel from the construction sector and as a result more and more orders are flowing outwards,” he said.
The current demand from the construction sector is approximately 24 MTPA, out of which almost 4 MTPA has been met by imports till November 2007.
With the government and the private sector investing heavily in expansion and strengthening of infrastructure in the country, the demand is expected to grow manifold.
“Currently the construction sector is consuming close to 44% or 20 MTPA of the total steel produced in the country while China is consuming almost 55% of its total production,” Singh said.
He said with investments in roads, railways, airports, ports and real estate growing at a brisk pace, the construction sector, as a ripple effect, is growing at the same rate or even higher.
By 2011-2012, the demand of steel from the construction sector will stand at over 55% of the total production.
This will be complemented by the impetus given by the government and the industry for more and more steel intensive structures, especially in ports, airports and real estate.
The construction sector in India is growing at the rate of 15% per annum while the steel industry is growing at the rate 12.9%. On the other hand, the demand for steel-related products is growing at the rate of over 13% per annum. “Though it is a good signal for the steel industry, if capacity augmentation does not keep pace with the demand, India will have to import high quantities of steel,” he said.
He said all major capacity augmentations planned by steel manufacturers will take at least three to four years to come on stream. Therefore, till 2010-2011 India’s share of imports will rise and companies such as Arcelor-Mittal and Posco will be the biggest beneficiaries, he added.
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