Steel production in India grew by 3.1% to 103 million tonnes and consumption increased by 7.9% to 90.7 million tonnes in FY 2017-18. India is currently the third-largest producer of steel after China and Japan, and is poised to become the second-largest producer soon. An increase in domestic demand from sectors like infrastructure, real estate and automobiles is anticipated. The government has mooted a plan to boost domestic steel capacity to 300mt per annum by 2030. However, this growth will have to be supported by private sector companies and will also require import of foreign technology and foreign direct investment (FDI).
A recent IMF projection pegs India’s GDP to rise by 7.4% in 2018 as compared to 6.7% in the previous year. The sustained growth shows that major steel consuming segments will benefit. These include sectors such as construction, real estate, capital goods, consumer goods, automobiles and the energy sector. Industrial corridors will also help improve India’s connectivity, further reducing costs involved in the logistics required for transportation across Indian states.
Today, countries relying on the US as an export market are considering different avenues for their exports largely due to the import duty imposition. This, in turn, may lead to an oversupply of steel in the global market pressurizing the international steel prices outside of the US. The US imposed 25% and 10% import duty on foreign made steel and aluminium respectively in March 2018, for national security reasons and to protect the US from cheap imports.
Up till now, the Indian steel sector has been comparatively inward-looking; however, it is likely to be increasingly impacted by developments in global steel, raw material and energy spaces. Factors such as substantial surplus of steel scrap in China in the future, shale gas gradually emerging as a cheaper source of fuel, innovations in steel driven through emission norms for end- use products, firmer environmental regulation impacting feasibility and locations of new capacity and more are likely to be influential from a medium- to long-term perspective in terms of the amount, speed and system of domestic growth.
The low per capita consumption of around 65 kg in India, compared to the world’s average of 214 kg, and an encouraging government stance towards the steel industry, all contribute to India being an attractive location for steel. Additionally, rapidly growing demand, with particular growth in demand from certain sectors such as construction and auto, economising of domestic steel demand and decline in steel capacity in China that is expected over the next decade are further expected to act in the country’s favour.
Currently, the steel being used in real estate contributes only 15-20% of total steel production in India. However, Indian real estate sector is likely to be most benefited due to rapid urbanisation which is expected to reach 543 million by 2025. Additionally, growing economy is also driving demand for commercial, hospitality and retail space.
The demand for affordable housing further enabled by the various government schemes and initiatives and the need to grow cities vertically and implementation of regulations regarding earthquake resistance and building strength further leading to an increase in steel intensity in construction are also likely to create a huge impact in the industry. Government introduced initiatives such as Pradhan Mantri Awas Yojna-Housing for All, Sardar Patel Urban Housing Mission, 100 Smart Cities Mission (by 2022), Pradhan Mantri Gram Sadak Yojna, Urban Infrastructure Development Scheme for Small & Medium Towns (UIDSSMT), National Heritage City Development and Augmentation Yojana (HRIDAY), Bharatmala project, 24×7 Power for All initiative (by 2019), Development of Industrial Corridors & National Investment & Manufacturing Zones, 75,000 MW Clean-Energy initiative (by 2022) etc. are expected to drive further demand for steel in India.
The macro trends affecting growth in real estate include the increasing urbanisation, overall growth in household income, growth in the services sector such as the IT boom which further adds to the demand for office spaces. The growth of the steel sector is perfectly accompanied by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations.
Megacities (with population more than 10mn) is expected to surge from 31 in 2016 to 41 in 2030. Similarly, the cities with a population of more than 5, 00, 000 will increase 31% to 1393 by 2030, according to World Cities in 2016, United Nations.
Despite global overloading, impending growth in domestic demand is likely to continue to energize ambitions in the Indian steel landscape. The steel intensity curve, socio-economic indicators together with announced directional plans of the Government, all show potential to multiply the size of the steel industry in India. The Make in India initiative has also been propelling the growth of the industry.
Considered as a starting step towards shaping construction is the concept of pre- casting. Moving construction offsite can likely improve efficiency, and it has been observed that “Precast & Pre-fabrication” has the potential to emerge as the one stop solution covering Design, Engineering, Manufacturing, Assembling and Project Management—thereby, pushing productivity up significantly.
It has been observed that “Precast & Pre-fabrication”, in a controlled environment, can possibly result in the three elements mentioned above. This is the future of construction technology in India, if India must match the pace of urbanisation.
Currently in a very nascent stage of precast construction, India has only 2% of total construction done through precast technology. The application of pre-cast has primarily been seen in metro-rail work (precasted segments, girders) and mass housing projects.
India is also preparing itself for a new technology, more seen in Singapore, called PPVC (Prefabricated Prefinished Volumetric Construction). In this approach, the pre-cast elements are finished in all aspects, be it wall painting or fittings of accessories in rooms, bathrooms etc.
Riding on the growing demand from ancillary industries and the supporting macro-economic factors, a growth in demand and further price stability is expected for steel industry. India has always played a vital role in the global industry and is likely to further strengthen its position with the backing of the government and the consistent growing demand.
Source: Financial Express
Huge Opportunities For Investment in Maritime Sector: Nitin Gadkari
India Tanker Shipping & Trade Summit 2019