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Sushim Banerjee, Director General Institute for Steel Development & Growth, Kolkata GROWTH...

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Sushim Banerjee, Director General Institute for Steel Development & Growth, Kolkata GROWTH PERSPECTIVES OF INDIAN STEEL INDUSTRY PRESENTATION ON BY Indian Steel Conference 23-24 March 2012, New Delhi Slide 2 World Growth pattern in 2005-2010 Real GDP growth (%) Country/ Region 200520062007200820092010 2011 (P) 2012 (P) 2013 World4.55.25.62.8- 0.65.23.83.33.9 USA3.12.71.90.0(-) 2.63.01.8 2.2 Germany0.83.42.71.0(-) 4.73.63.00.31.5 Japan1.92.02.3(-) 1.2(-) 5.24.4(-) 0.91.71.6 Russia6.48.28.55.2(-) 7.94.04.13.33.5 Brazil3.24.06.15.1(-) 0.27.52.93.04.0 China11.312.714.29.69.110.49.28.28.8 India9.29.79.96.45.79.97.47.07.3 World Trade Volume (Goods & Services) 7.88.97.42.9(-) 11.012.76.93.85.4 Source : IMF, World Economic Outlook Jan 12 Slide 3 - Steel : green and recyclable - Steel : fast-track construction with least Public inconvenience and nuisance during construction and thus more Environment friendly - Steel Structures : neighbourhood friendly creating dust - free environment -Wood largely replaced by steel preventing large scale deforestation WHY STEEL ? Steel : more freedom of expression Steel : more creativity and viability in design and opportunity to express functional requirements in structured way 3 Slide 4 WHY STEEL ? FLEXIBILITY -Steel : large column free clear spans, ideal for long spans upto 40 metre long -Steel structures : provide larger usable space (more carpet area) for multi-storeyed building and large spans for bridges and flyovers with uninterrupted traffic movement -Latest developments in Steel making meet up the challenges of corrosion with application of latest developed paints over bare structural steel -Latest development in painting technology like application of intumescent paints or vermiculite protect bare Steel structures directly from fire -Steel : sustain reversible loads due to inherent properties like ductility -Steel more cost effective than concrete as a framing solution 4 Slide 5 Slide 6 Shift in Production Base : 2000 - 2011 2000 2011 Slide 7 Slide 8 Global Steel Capacity Utilization Slide 9 Slide 10 YEAREXPORTSPRODUCTIONEXPORTS % 1980140.6578.724.3 1990171.0654.026.2 2000307.1782.539.2 2002313.1836.237.4 2004366.2992.536.9 2005371.31062.235.0 2006418.31158.636.1 2007443.81251.435.5 2008436.21234.635.3 2009326.31147.028.4 2010386.41316.429.4 WORLD TRADE IN STEEL PRODUCTS (Million Tons finished Steel) Source: World Steel In Figures,2011 Slide 11 Apparent Consumption:2008-2011 (MT) Country20082009Y-O-Y%2010 (P)Y-O-Y%2011 (P)Y-O-Y%2012 (P)Y-O-Y% China447551.423.4587.66.7623.36.1649.44.2 USA98.459.2(-) 39.879.935.089.211.693.85.2 India51.457.912.564.912.268.013.673.17.9 Japan78.052.8(-) 32.363.520.264.00.863.4(-) 0.9 S. Korea58.645.4(-) 22.552.415.456.17.256.71.0 Russia35.424.8(-) 30.135.943.840.914.042.64.1 Germany42.428.0(-) 34.035.927.339.18.838.9(-) 0.5 Italy33.320.1(-) 39.725.727.226.84.525.1(-) 6.3 Brazil24.018.6(-)22.826.140.525.0(-) 4.226.76.9 Turkey21.518.0(-) 16.023.630.726.914.129.06.9 Spain18.011.9 (-) 34.013.113.013.2(-) 1.012.87.8 World12181140(-) 6.4130214.213785.814313.9 Source: WSA February 2012 Slide 12 GLOBAL PRICE MOVEMENT- FINISHED STEEL Source: HRC: Russia Black Sea Export FOB($/T) Source: Rebars: Turkey Export FOB($/T) Slide 13 GLOBAL PRICE MOVEMENT- RAW MATERIALS Source : SBB - India Iron Ore: China CFR; Coke: China; Export (FOB) Melting Scrap: East Asia Import HMS(80:20) Slide 14 CURRENT FEATURES IN GLOBAL STEEL MARKET Global Economy projected to grow by 3.3 percent in 2012 after clocking 3.8 percent in 2011. Subdued steel demand in EU, Japan and USA. Restriction on real estate and restructuring of small scale polluting steel units and recent strategy of moderating GDP growth rate by China leads to a suppressed growth in steel demand. Would Surplus steel in China cause concern to India? Marginal hike in Finished Long Steel prices following rise in scrap prices with less volatility in coal & iron ore prices may dampen move for immediate price increase. Slide 15 (% SHARE IN GDP ) Category1980- 81 2000- 01 2006- 07 2007-08 2008-092009-102010-11 (QE) 2011-12 (AE) Primary38.123.918.118.017.214.614.513.9 Secondary25.925.828.929.128.528.127.827.0 (Manufacturing)13.815.316.1 15.615.915.815.4 (Construction)6.65.88.28.48.67.9 7.7 Tertiary36.050.353.052.954.357.357.759.1 Total100 GDP Growth (%)7.64.49.69.36.88.08.46.9 Gross Fixed Capital Formation (% of GDP at Market Prices) 22.731.332.932.331.630.429.2 Domestic Saving (% of GDP at Market Prices) 23.734.636.832.033.832.331.6 (e) 1.Data for 2006-07 onwards based on 2004-05 prices as per revised estimates. 2.Stagnant share of Manufacturing and Secondary Sector in GDP 3.Share of Industry in GDP: China (59), S. Korea( 44), Kazakhsthan (37) (Source : CSO, Economic Outlook : 2011-12) STRUCTURE OF INDIAN ECONOMY Slide 16 PERCENTAGE GROWTH IN MAJOR INDL. SEGMENTS SegmentsWeight ---------------PERCENTAGE GROWTH DURING---------------- 1994- 95 1995- 96 2005- 06 2006- 07 2007- 08 2008- 09 2009- 10 2010- 11 April- Jan12 (Apr Jan11) ELECTRI- CITY 103.168.58.15.2 7.3 6.32.76.15.58.8 (5.3) MANUFAC TURING 755.279.813.610.3 15.0 18.42.54.89.04.4 (8.9) MINING141.579.89.72.3 5.2 4.62.67.95.2(-) 2.6 (6.3) CAPITAL GOODS 88.2524.817.918.1 23.3 48.511.31.014.8(-) 2.8 (17.0) CONSUME R DURABLES 84.6010.236.116.2 25.3 33.111.117.014.23.9 (13.7) TOTAL INDUSTRY 1000.008.412.78.6 12.9 15.52.55.38.24.0 (8.3) Source: CSO, Series for 1994-95 & 1995-96 on 1993-94 = 100 base and all others on 2004-05 = 100 base Slide 17 4 th largest producer of crude steel in the world Current capacity of crude steel : 78 mt slated to go upto 140 mt by 2016-17 and around 200 mt by 2020 Largest producer of sponge iron in the world (27.6 mt comprising of 43.5% share in world production) 3 rd largest consumer of finished steel in the world Crude Steel Capacity estimated to rise by 11% by 2012 Weight of 6.68 in Infrastructure Index A Net Importer of Steel Indian Steel Industry 17 Slide 18 Trend of Steel Consumption in India Source: JPC CAGR 8.9 (2000-01 to 2010-11) Steel Consumption in India grew @ 8.9 percent annually in last decade against 4% annual growth in Global Steel Consumption 18 Slide 19 Indian Steel:Demand Drivers Construction (Infrastructure) Projects Transport of Petroleum/ Water TLT Rail tracks Manufacturing Tube Making Wire drawing Fabrication Fastners Power plant equipment Agricultural implements Household appliances Auto Commercial Vehicle Passenger cars Two wheelers Auto Components Each of these segments has good potential to grow Slide 20 Infrastructure Building and Construction Construction Sector composed of : - Infrastructure : 54 percent - Industrial Expansion : 36 percent - Residential and Commercial : 10 percent Sectoral Break-up of Construction Sector : Building76%Mineral Plant18% Roads63%Medium Industry20% Bridges65%Transmission22% Domestic75%Urban Infrastructure66% Power38%Maintenance81% Railways78% Assuming 80% fulfillment, the projected investment in infrastructure (at current prices) to generate on an av. steel demand for around 214 mt for next 5 years i.e. 43 mt per annum for infrastructure sector Slide 21 The tentative master list of infrastructure subsectors as on 01.03.2012 which may be reviewed subsequently are : CategoryInfrastructure Sub-sectors TransportRoads & Bridges, Ports, Inland Waterways, Airports, Railway Trucks & Bridges, Urban Public Transport EnergyPower Generation & Distribution, Oil & Gas Pipeline & LNG Storage Facility Water Sanitation Solid Waste Management, Water Treatment & Pipelines CommunicationTele-communication Social & Commercial Infrastructure Educational Institutions, Hospitals, 3-star or more Hotel, Industrial Park, SEZ Fertilizers, Cold Storage, etc. INFRASTRUCTURE DEFINED Slide 22 ENABLING INFRASTRUCTURE FOR MANUFACTURING GROWTH India ranks 54 th among 57 th countries in Infrastructure facilities against China (37), Brazil(32), Thailand(20). Energy (27% T&D losses, 14% peaking deficit) and Logistics costs impacted by quality of Infrastructure Cost of Power comparable, but erratic and unreliable power supply leading to frequent use of Generators and enhancing cost. Poor Roads increase Freight (only 20% of NHs are 4 lanes, 50% 2 lanes & 30% single lane) Average Port turnaround time is 84 hrs against Thailand (10 hrs), Sri Lanka(17 hrs) and poor port connectivity inadequate berths and draft. Average Truck speed in India at 40 kmph against China(60) and USA(100) leading to higher logistic costs. Average time taken for Environment and Forest clearance is 1 to 3 years resulting in delay in 60% of power projects and 40% of Road projects. Slide 23 Projected Investment in Infrastructure (Revised) XI Plan Sectors Rs. CroreShare (%) Electricity (incl. NCE)6,66,525 32.42 Roads and Bridges3,14,152 15.28 Telecommunication2,58,439 12.57 Railways (incl. MRTS)2,61,808 12.73 Irrigation (incl. Watershed)2,53,301 12.32 Water Supply & Sanitation1,43,730 6.99 Ports87,995 4.28 Airports30,968 1.51 Storage22,378 1.09 Oil & Gas Pipelines16,855 0.82 Total2056151*100 (at 2006-07 prices) Infrastructure Investment to reach 7.1% of GDP in 11th Plan from 5.15% of GDP in 10th Plan * Anticipated Investment in infrastructure in 11th Plan : Rs.1948069 Cr Slide 24 Investment in Infrastructure : Volume and Pattern *Projected investment in infrastructure in XII Plan : $ 1 trillion (Rs. 49,50,000 cr reaching around 9.7% of GDP) against Chinas current infrastructure investment of 11% *Public investment predominantly in non-commercial sector like rural roads and Private investment in commercial sectors e.g. roads, ports, airports. Viability Gap Funding, setting up of IIFCL. *Private Investment to reach 50% of total investment in infrastructure in 12 th Plan up from 37% in 11 th Plan. 100% FDI for Ports, Roads and Aviation Infrastructure. *Private Capital in public projects via PPP route Maximum in NHDP and also in State Roads,

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