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Dr. A.S.Firoz
Strategy Consultant
STEEL AND NATURAL RESOURCES Strategy Research
and Former Chief Economist, ERU, Ministry of Steel (on
sabbatical)
Steel Industry Globally
• Sliding down the super-cycle or just
catching a breath?
• Steel prices have come crashing down.
• Stainless steel consumption demand has
fallen. Prices weak.
• Alloy steel looks vulnerable.
World Crude Steel Production
1600
1400 1344
1250
1200 1146
1069
1000 970
904
Million tonnes
848 850
799 777 785
800 734 752 750
720 728 725
tion
600
400
200
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Crude Steel
World Alloy Steel Production
90
79
80
73
70 67
62
60
53
Million tonnes
50
44
40 39 39 40
40 38 38
30
20
10
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
30,000
28,359
27,836
24,570 24,319
25,000
22,840
20,690
20,000 19,187
Thousand tonnes
15,000
10,000
5,000
0
2001 2002 2003 2004 2005 2006 2007
World
Stainless Steel Production by Region
18,000
16,200
16,000
15,074
14,000
12,498
11,897
12,000
10,645
thousand tonnes
9,972
10,000 9,422
9,048 9,043 8,823
8,628 8,669
8,210 8,403
8,000
6,000
4,000
2,735 2,830 2,933 2,951
2,688 2,604
2,289
2,000
3,500
3,000
2,500
Thousand tonnes
2,000
1,500
1,000
500
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
• Alloy steel demand depends hugely on the • 60% of the alloy steel is produced in
growth of the manufacturing sector. EAF units.
• It faces a substitution threat from carbon steel • Despite low wage rates and abundance
in the non-OEM products segments.
of labour, the industry faces shortage of
• Alloy steel consumers are either large players skill. Skill development costs have
or organised to a cartel commanding massive
‘pricing power’. fallen on to the industry.
• Whereas the alloy steel producers face a • India’s exports are largely to
volatile market for their inputs, such as scrap, developing nations. Bulk of the
ferro-alloys, DRI and have no control over consumption demand originates in the
them, are forced to accept buyers’ prices. quality sensitive developed country
• This is why the alloy steel producers can markets.
neither hope for windfall ( when the time is
good ) earning stability ( when the production • The industry needs some space for
costs rise). product development, improve
• Product development efforts have often been management and move to higher scale
marred by instability in contracts for long of production to become global players.
term supply. This has reduced risk bearing • For that, the industry needs a
capacity of the alloy steel industry. favourable fiscal environment and
• Most players, therefore, are confined to the support ( also patience ) from the user
lower end of the product with the bulk of the industries.
high end alloy steel products being imported.
Alloy Steel : External Trade Pattern
Japan
Exports FY06 - 0.05 Mn.T 11%
Source: Avalon
Imports of Stainless Steel into India 2005 ( tonnes)
Exports of Stainless Steel from India 2005 (tonnes )
9,952
76,600
47,684 48152
4 , 15 4
70740
362,672
11112
Americas West ern Europe Aust ralasia Asia Af rica East ern Europe Americas Western Europe Africa Asia Australasia Eastern Europe Unallocated
Stainless Steel Industry in India : Strategic Issues
• Stainless steel production growth in India was steered by the demand for
utensils. The share of this has been on the fall continuously in the past years.
• New market development efforts have exhibited enormous potential now
outside of this sector. Commercial housing, public utilities and infrastructure
have the most potential now, especially for flat products.
• Use of stainless steel rebars, fasteners and miscellaneous engineering
applications have potential for long products.
• New demand opens up opportunities for state of the art production at global
scale.
• Greenfield projects are few : brownfield expansions have been on traditional
line.
• Foreign investments have been focused on value addition only.
• Integrated projects faces financial risk due to excess global melting capacity.
• The Indian producers may remain confined to the lower end of the product in
integrated operations and add finishing facilities from imported semis.
• Export potential of India’s stainless steel may also be hurt in the short term.
Stainless Steel Industry in India : Strategic Issues
25
•Demand growth of alloy steel will
remain moderate and will follow
the growth rate in manufacturing.
20
19.5
•Stainless steel demand growth will
be driven by overall economic
15.2 prosperity, disposal incomes with
15
Million tonnes
0
06-07 11-12 15-16 20-21