Indian Stainless Demand set to Rocket According to ISSDA

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Ferrous Metals, Supply & Demand

An extremely bullish article appeared this month in Business Standard, an Indian online publication, regarding Indian stainless steel consumption. It’s interesting not so much because the projections it makes appear wildly optimistic in the current climate but more because the numbers illustrate why investors get so excited by emerging markets in the first place.

The gist of the article is estimates made by the president of the Indian Stainless Steel Development Association (ISSDA) that per capita consumption of stainless steel will grow from 1.2kgs (2.6lbs) to 2.0kgs (4.4lbs) in 2-3 years. The article then goes on to say 70% of the stainless steel consumed in India goes into kitchen and related products yet the ISSDA is suggesting the growth will come from new applications like the Tata Nano and new railway carriage construction.

India consumes about 1.3 million tons of stainless steel per annum which means on the above numbers about 910,000 tons goes into the cutlery and catering industry and the remaining 390,000 tons goes into everything else. Tata are projecting sales of 250,000 cars per annum following launch this year and the ISSDA says each Nano uses 5kgs of stainless steel; well, that’s 1,250 tons of additional consumption. They also say the Indian railways are building two new rail carriage construction plants to make 15,000 new stainless steel railway wagons. Each wagon uses 7-8 tons of stainless steel depending on the capacity, so assuming they reach this level of production capacity in one year, they will consume an additional 112,500 tons of stainless ” that’s a big if, we expect that 15,000 wagon figure is to be achieved over many years. You may think all those bright shiny shopping malls and cinema complexes springing up all over Mumbai, Delhi, Bangalore, and so on, must be consuming a lot of stainless? No even according to the ISSDA such construction only consumes 2% or about 26,000 tons, per annum. So all in all we are struggling to see where this sudden surge in demand will come from. Will Mrs Patel’s all over India be encouraged to rush out and buy new stainless steel cutlery or kitchen appliances to make up the shortfall?

We do not doubt demand will grow although the timescale quoted appears optimistic. If per capita demand in the US is some 7kgs (15lbs) per annum India clearly has a lot of potential for growth from the current 1.2kgs and with an estimated population of 1.17bn, even 0.1kg increase can add over 100,000 tons per annum of demand. Now Mrs Patel can I interest you in this nice shiny new cutlery set?

–Stuart Burns

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