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Conference Paperon Steel Structures
April 2012
www.deloitte.com/in
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Contents
Steel Structures in India: An Overview 4
Delivery Models or Steel Structures:
Onsite vs. Workshop Fabrication 6
Key Application Segments or Steel Structures:
An Indian Perspective 8
Building Segment: The Next Big Thing 10
Key Drivers: Providing Impetus to Steel Structures
Demand in India 12
The Future: A Directional View o the Steel
Structures Market 13
Conclusion 14
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Steel Structures In India: An Overview
The per capita consumption or steel structures in India
is currently between ~6-7 Kgs, growing at a CAGR o
over 10% since the past ve years. This market has
witnessed a higher growth as compared to both the
Indian steel GDP as well as the Indian construction
GDP, driven by large investments in industry and
inrastructure, the two key end use segments or steel
structures in India.
The types o steel sections used in India or both
structural steel and pre-engineered buildings (PEB) are
mentioned in Exhibit 1 below
Exhibit 1: Steel structures Typical sections, characteristics and key application areas
Type o Steel Sections
Light
Typical PEB Range Rarely Prevalent
Medium
Typical Structural Steel Range
Heavy Extra Heavy
Characteristics
PEB Structural Steel
Key Application
Areas
Relatively simple and standard designs/ sections
Type o sections used Only plate abricated sections
Business Model ollowed Mainly workshop
abrication
Erection outsourced to certied erectors who
assemble ready modules on site
Speed o delivery at lowest cost is critical
Factory buildings o small/ medium scale industrieslike FMCG, agro industry, ood & beverages, pharma-
ceuticals, textile, etc.
Inrastructure acilities like warehouses, airports,
metro stations, etc.
Light/ medium buildings like retail outlets, automobile
showrooms, etc.
Typically customized designs, which may be more
complex in nature
Type o sections used Mix o hot rolled, proles and
plate abrication sections
Business Model ollowed Combination o on-site
(predominant) and workshop
Erection Generally in-house capabilities required to
abricate/ erect sections on site
Heavy industries like steel, cement, oil & gas, etc.
Inrastructure acilities like power plant, aircrat
hangers, railway bridges, etc.
Buildings like high-rises, large shopping malls, etc.
Cross-over rom PEB to Structural Steel
Note: Type o sections indicated above are based on section weights
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In India, structural steel fabricatorspredominantly follow on-site fabricationmodel, while globally all steel structures arefabricated in workshop.
Exhibit 2: Typical Value Chain or steel structures in India
Value Chain o Steel Structures in India
The abrication model ollowed in India or structural
steel diers rom the model ollowed in a developed
country. Typically in a developed country, all steel
structures including structural steel and PEB are
abricated in the workshop. While in India, structural
steel has traditionally been abricated on-site, mainly
due to lack o inrastructure or transporting heavy
sections rom an o-site workshop to project site,
sucient space on-site to set-up abrication workshop
and availability o inexpensive skilled labour at the
project site. Pre-engineered Buildings, however, are
abricated in the workshop even in India.
Fabricators o steel structures mainly undertake
abrication and erection jobs. The typical activities/ value
chain or a steel structures abricator is mentioned in
Exhibit 2 below
Demand or steel is primarily
met by the domestic
suppliers
Primary steel producers
cater to demand or larger
hot rolled sections and steel
plates (or Plate Fabricated
Sections)
Unorganised sector
(Re-Rolling Mills) cater
to supply o smaller and
medium sized sections in the
regional markets
The demand or extra heavy
rolled sections (>700 mm)
is primarily met through
imports
Structural steel abricators
and PEB players abricate
sections/ modules using steel
plates
PEB ollows workshop abri-
cation model, while structural
steel pre-dominantly ollows
on-site abrication model
Other intermediaries
involved in the value chain
are technical consultant,
structural steel detailer, EPC
contractor and erection
contractor
In case o PEBs, certied
builders erect the various
modules o the building
on-site as supplied by the PEB
player
A large portion o abrica-
tion in case o structural
steel happens on site, hence
it is imperative or a struc-
tural steel abricator to have
in-house erection acilities
as abrication happens in
conjunction with erection
Hot rolled sections are
typically erected directly on
site
Steel Supply Fabrication Erection
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The steel structures industry broadly ollows two models o delivery namely the Onsite and the Workshop Models as d iscussed below.
Delivery Models for SteelStructures: Onsite vs. Workshop
Fabrication
Onsite Fabrication Model Workshop Fabrication Model
Brie
Overview
Typically used or industrial and inrastructure
projects
Technical consultant creates the basic designs
which are then detailed by a structural steeldetailer
The steel (hot rolled sections and plates) is
supplied on-site either by turnkey contractor or
by the client, and seldom by steel abricator
The structural steel abrication and erection (F&E)
contractor is responsible or equipments and
skilled labor
Mostly applicable or PEBs and building segment (prominently or
high rise buildings)
Certied builders (in case o PEB) or a abrication and erection
(F&E) contractor (or buildings) are responsible or projectmanagement & delivery
Design is done in-house or could be provided by the project
developer/ structural consultant to the abricator
Steel (HRS and/ or plates) is procured by the PEB players/ F&E
contractor
Bulk o abrication activity is carried out in the workshop o the
PEB player/ F&E contractor (with in-house skilled labor) and the
abricated sections are transported on-site
Value Propositions o Delivery Models
Market Coverage Site Fabrication Model can enable a contractor to
take on projects across the country model per
se has no geographic limitations
Geographical limitations due to logistics/ transportation
constraints can cater to clients within a narrow geography o
~500 km radiusSite Limitations Cannot be employed in Building construction
sites due to space constraints at site. No such
limitations or industrial/ inrastructure projects
Since abrication activity is osite, no such restriction
High-rise building construction may throw challenges in terms
o managing erection activities (sometimes or complex sections)
within space constraints
Labor Flexibility to employ labor rom a contractor as
required
Need to maintain a pool o skil led workorce in-house or abrica-
tion and erection (in case o buildings) which increases costs
Contractual
Specifcations
Many times, site abrication clause is stipulated
by the Turnkey Contractor or ease o monitoring
and control
The contract may also include a clause o quality inspection at
the workshop by client supervisor i elt necessary
Delivery Costs Since abrication is onsite, there are no additional
delivery costs involved
Additional costs o delivery (~2-3%) rom workshop to site,
increases the overall costs o execution
Tax Implications Comparatively advantageous as contract is
treated as works contract, attracting only service
tax
Cost o project increases due to additional excise duty on the
abricated components delivered rom workshops (typically excise
duty adds ~2-4% more to the overall cost o the project)
Future Trends In advanced economies, workshop model is prevalent and preerred unless sections are complex in nature and hence,
are orced to abricate on site. In the Indian context, the delivery models are in evolution stage and in industrial segment,
there are early indicators o change towards workshop abrication especially or power segment
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Workshop delivery model is prevalent in PEB and Buildingssegment, and there are early indicators of change in
preference in industrial segment especially for power.
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Key Application Segments forSteel Structures: An Indian
Perspective
Industry segment remains the key demand
driver for steel structures in India.
Key End Application Segments
Although industry and inrastructure segments have
shown avorable trends in usage o structural steel,
the building segment (especially residential) is still in a
nascent stage in terms o acceptance o structural steel
as a avorable building material.
The industry segment has the largest share o
demand or steel structures in India, ollowed by the
inrastructure segment.
Within the industrial segment, steel and cement
industries account or a large share o demand o
structural steel, while actory buildings dominates the
demand or PEB.
Within the inrastructure segment, the demand or
structural steel is mainly driven by power sector, while
logistics/ warehousing applications drive demand or PEB
in India.
Other segments, mainly transport industry (construction
o wagons/ coaches, ships, trucks/ trailers, etc.), OEM
and plant equipment abrications, and other areas like
railings, scaoldings, etc. account or a small share o
demand or steel structures
IndustryInfrastructure
Buildings
Other sectors
50-60%
15-20%
20-25%
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Preerence or steel vis--vis cement
For each application within these segments, there is a varying preerence or steel vis--vis cement, which is shown
below
Application Area Preerence Comments
Industry
Steel, Aluminium, Cement, Fertilizers, Oil and
Gas, Petrochem, etc.
Within the Industry segment, steel sector is the
key application area or structural steel.Structural steel is mainly used in construction o
plant superstructures.
Factory buildings/ Warehouses PEB constructions are preerred in the case o
actory buildings/ warehouses. Concrete nds
limited preerence as a construction material
within this segment.
Inrastructure
Power plants/ Transmission towers Power sector (power plants and transmission
towers) is one o the key demand drivers within
inrastructure segment since steel is the deault
material o construction.
Telecom towers Structural steel is the deault material or
construction o telecom towers
Airports/ Metro rail Preerence or steel has gradually increased in
this segment, due to innovative designs being
adopted.
Bridges/ Flyovers Concrete is the deault material or bridges/
fyovers. Structural steel is preerred in the case
o railway bridges, especially in earthquake
sensitive regions and projects which require quick
turn-around.
Buildings
Residential/ Commercial buildings Concrete remains the deault construction
material within this segment primarily due to
the prevailing mindset and inhibition to change.
Structural steel has limited preerence in the case
o select high-rise building projects.
Shopping malls Structural steel has steadily been gaining pre-
erence with the advent o new designs or
shopping malls.
Other Areas
Transport industry, OEM & plant equipment,
Railings, Scaoldings, etc.
Steel is the deault material or most o these
other applications.
Structural SteelConcrete
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Building Segment: Te NextBig Ting
The building segment in India is presently dominated by
concrete. The building segment has been slow to adopt
the global construction practices, even in the metro-
politan cities. The limited availability o certain structural
sections have also been responsible or the limited
penetration o structural steel in the building segment.
Exhibit 4 compares demand or structural steel rom
building segments or UK, USA and India indicating
the low contribution o structural steel rom buildings
segment in India.
Exhibit 5 provides a relationship between the degree o
maturity o an economy and its impact on use o struc-
tural steel in building segment within that economy.
It is seen that as a countrys economy matures, the
demand or structural steel shits rom non-building
segment to building segment.
Structural steel usage in building segment in India is
presently driven by exception rather than practice.Penetration o structural steel in overall buildings
segment is currently at
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Structural Steel demand in building segmentis expected to evolve in the future.
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Key Drivers: ProvidingImpetus to Steel Structures
Demand in IndiaThe industry and inrastructure segments are currently
the two main segments contributing to the overall
demand o steel structures in India. At present the pene-
tration o structural steel in building segment is small,
primarily due to preerence towards the use o concrete.
However, this is expected to change in the uture, over
medium to long term timerame.
Structural Steel
Structural Steel is the deault material used or construc-
tion o plant superstructure within the industry segment.
Steel industry is a key demand driver within the indus-
trial segment. Oil & gas, petrochem, cement, ertilizers,
etc. are amongst the other industries responsible to
drive demand within this segment.
Structural steel remains the deault material within the
power sector driven by huge investments and capacity
additions in new power plants and transmission towers.
Increased government spending in the inrastructure
segment, estimated to the tune o ~$1 Tn. over next 5years is expected to result in huge demand in various
sectors, especially airports, sea ports, railway stations,
railway bridges and metro rail.
Private sector investments in telecom towers and
shipyards are some o the other drivers or structural
steel demand within the inrastructure segment.
PEB
The demand or PEB in India is expected to be driven by
the logistics and retail sectors, which require large PEB
structures as warehouses and retail space.
In addition, penetration o PEB in actory buildings is
increasing, as the manuacturing sector, mainly small
scale industries, is recognizing the advantages o using
PEB over conventional concrete buildings.
Buildings A Shit in Mindset
Concrete remains as the deault construction material in
the buildings segment. Structural steel is being selec-
tively used in construction o high-rise buildings with
~3-4 projects using steel/ composite structures coming
up annually in India mainly in the metropolitan cities
constrained by limited land mass availability. Fabricators
and developers are now recognizing the advantages o
using structural steel over RCC, which has resulted in a
slow but gradual shit o preerence towards structural
steel within buildings segment.
There is a recent trend o using metal buildings as an
option or aordable housing. These are typically small
metal buildings, complete with civil oundations, elec-
trical, plumbing and drainage solutions.
Structural
Robustness
Increased
Government
InvestmentsAesthetic
Look
Reduced
Delivery
Time
Design
FlexibilityShift in
Mindset
EnvironmentallyFriendly
Models
Achieved
Evolution of
Domestic
Fabrication
Capabilities
Re-usability of
Construction
Material
Exhibit 7: Key Factors Driving Growth
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Te Future: A DirectionalView of the Steel Structures
Market
The per capita consumption or structural steel and PEB in India is currently hovering at around 6.2 Kgs. However,
ater considering ollowing key parameters, the overall per capita consumption o structural steel and PEB or India
over the next 10 years has a potential to look even more attractive with the overall indicative potential reaching
~17-22 Kgs per capita.
The growth of steel structures and PEB demand in Indiais expected to be driven by robust economic growth and agradual change in mindset.
Parameters Indicative Consumption
(Kgs per Capita)
Description
Market SizeCurrent
Market Size
(2011-12)
Growth based
on current
Economy
At current levels of economic growth,there is
potentialto increase per capita consumptionby
~6.5-9.6 Kgs over next10 years.Economic
FactorsRobust
Economic
Growth
Incremental
Taking into account the strong growthshown
by the Indian economy, there is potential to
increase per capita consumption by ~5.2-6.4
Kgs over next 10 years.
Change in
Mindset
Buildings
Segment
Bridges/
Flyovers/
Metro Rail
Projects
E volution in building designs coupled withpossible shift of preference towards structural
steel, there is potential of increasing the per
capita consumptionby ~0.15-0.25 Kgs over the
next10 years.
With significant investment in the infrastructure
segment and application of latest designs,
there is potential of increasing overall per
capita consumptionof structural steel and PEB
by ~0.05-0.10 Kgs over the next 10 years.
Overall Indicative Potential
being generated over next10 years
Indicative Estimate
Chart not to scale
SS: ~4.9-7.1PEB: ~1.7-2.5
SS: ~3.6-4.3PEB: ~1.6-2.1
SS: ~ 0.15-0.25
SS + PEB:~0.05-0.10
Structural Steel (SS) Pre-engineered Buildings (PEB)
SS: ~5.5PEB: ~0.7
SS: ~14.6-17.2PEB: ~4.2-5.6
Overlap between SS & PEB
Source: Deloitte Research
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Conclusion
Against a backdrop o an uncertain global environment,
the Indian economy aced multiple macroeconomic
challenges in scal year 2011-12, due to which it regis-
tered a lower growth o ~6.9% in FY 2011-12. However,
demand or steel structures in India maintained its high
growth path driven by increased emphasis on inrastruc-
ture development by Government o India and demand
rom the industrial segment.
While concluding this conerence paper, based on
current trends it is important to note the ollowing:
Strong internal demand and emphasis on developing
inrastructure can be expected to remain the ounda-
tion on which the Indian growth story would be built
in the uture
Industry and inrastructure segments can be expected
to remain the key demand drivers or steel structures
in India over the next 5 years steel and power
would drive demand or structural steel, while actory
buildings, retail buildings and warehouses would drive
demand or PEB in India
Usage o structural steel in building segment is
currently driven by exception rather than practice.
In uture, share o building segment is expected to
increase in the overall demand or steel structures
as developers are recognizing the benets o using
structural steel in buildings
Presently, the Indian structural steel industry mainly
employs the on-site model o abrication or industry
and inrastructure segments. Workshop delivery model
is prevalent in PEB and buildings segment. There are
early indicators o change in preerence in the indus-
trial segment especially or power rom on-site to
workshop model
Overall, there is good potential or steel structures in
India owing to robust economic growth, increased
government spending on inrastructure and change
in mindset with regards to use o structural steel in
building and other inrastructure segments
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Notes
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