TC Malhotra contributes to MetalMiner from New Delhi. This is the second of a two-part series. You can read the first post here.
Meanwhile, India continues to maintain its lead position as the world’s largest producer of direct reduced iron (DRI) or sponge iron during for 2010, a position it has held since 2002. India expanded crude steel production from 51.17 million tons per annum (mtpa) in 2005-06 to 72.96 mtpa in 2009-10. Crude steel production grew at 8.4 per cent annually from 46.46 MT in 2005-06 to 64.88 MT in 2009-10.
Industry analysts anticipate that capacity in the country will likely reach 124MT by 2012.
However, global consultancy firm Ernst & Young in their report, Indian Steel Industry 2010 predicts India will have annual production capacity of only 101 million tons by 2011-12 against the targeted 124 million tons mainly due to regulatory delays and problems in acquiring land.
Over the part four years, two mega steel projects, one each in Jharkhand and Orissa, proposed by Arcelor Mittal and entailing an estimated investment of Rs 1000 billion ($22.2 billion) have seen inordinate delays. Similarly, South Korean steel giant POSCO’s Rs 540 billion ($ 12 billion steel project in Orissa state) also faces delays.
Steel demand will also get a boost from the construction and energy sectors combined with growth in the earthmoving segment, driven by government-backed infrastructure projects. Growth forecasts for the earthmoving segment could reach a CAGR of approximately 18 percent during FY 2011- FY 2014, as per a research report from Putzmeister a machinery equipment manufacturer.
According to the Putzmeister report, the outlook for India’s construction industry remains largely unchanged between the financial years of 2010-11 and 2011-12 and the growth tandem would remain the same until fiscal 2015-16. According to the report, this relatively high growth figure indicates a large number of projects will become available to infrastructure companies throughout the country during the forecasted period. The research sees certain sectors, such as the power and airport sectors, presenting more growth opportunities than others.
The latest statistical data from India’s Ministry of Statistics and Programme Implementation show that the real growth for the Indian construction industry reached 9.6 per cent year-on-year for April-September 2010.
However, the Putzmeister report says that the growth rates forecasted for the construction industry sectors will exceed overall GDP growth. The commercial and industrial construction sectors have seen growth at an annual rate of approximately 10 percent, compared to 6-7 per cent for residential construction.
Although India has experienced a slower growth rate due to the current economic downturn, most pundits expect it to rise again within the next three to four years.
In addition, India has already announced it will provide power to all of its citizens by 2012 under the new National Electricity Policy. To achieve this, India will require a total capacity addition of 100,000 megawatts over the 10th and 11th five-year (2007 2012) plan period. This certainly bodes well for steel.