World’s crude steel production has reached a level of 1,329 mn tonnes in year 2008 but declined by 1.1 per cent on YoY basis. During the period 2001-2008, the world crude steel production has grown at a Compounded Annual Growth Rate (CAGR) of 7.9 per cent. Growth in crude steel production was mainly driven by emerging countries such as China and India which registered a CAGR of 18.7 per cent and 10.6 per cent, respectively, during the same period.
With global economic meltdown in 2008, global crude steel production in each month, post the month of August, has registered a negative growth on YoY basis. China produced about 502 mn tonnes of crude steel but the growth has slowed down to 2.6 per cent as compared to 15.8per cent recorded in CY 2007 and 18.8 per cent in CY 2006. India remained the fifth-largest crude steel producer, registering a growth of 3.7 per cent on YoY basis.
India’s finished steel production has increased from 35.4 mn tonnes in financial year 2003 to 52.8 mn tonnes in financial year 2008, registering a CAGR of 8.3 per cent. During the same period, finished steel consumption has grown at an incremental CAGR of 11.9 per cent. Demand of steel in the country has been growing at a multiplication factor of approximate 1.2x-1.3x of the growth rate of the economy.
Construction sector in the country is the largest consumer of steel and accounted for about 52 per cent of the total finished steel consumption in financial year 2008. India’s exports of finished steel have remained almost stagnant in the range of 4-5 mn tonnes in the past six years. But import of finished steel has grown from 1.5 mn tonnes in financial year 2003 to 6.5 mn tonnes in financial year 2008, registering a CAGR of 33.8 per cent. In financial year 2008, India turned into a net importer of finished steel as country’s import rose by almost 46 per cent on YoY basis.
India has self sufficiency in iron ore but for coking coal it has to mainly rely on imports. Iron ore production in the country has increased from 123 mn tonnes in FY 04 to 204 mn tonnes in FY 08, registering a CAGR of 13.9%.
In FY08, India produced about 204 mn tonnes of iron ore, out of which the country consumed about 100 mn tonnes and 104 mn tonnes of iron ore was exported out of which about 80% of exports were made to China.
Country’s coking coal import has increased almost two fold in the past six years. In FY 08, India imported about 22 million tonnes of coking coal. Coke which can be directly used in BF is also not available in plenty in the country. Imports of coke in the country have increased from 2.2 mn tonnes in FY 03 to 3.8 mn tonnes”
in FY 07.
Globally, unprecedented demand growth of steel from China in the past few years has played a major role in the movement of international steel prices. Till the first half of year 2008, globally, steel prices showed a rising trend. Post this period, due to global economic meltdown, steel prices have softened to the extent of US$ 500-600 per tonne. Domestically, due to government interventions, steel producers were unable to hike steel prices in line with the rise in international steel prices. After decline in prices by steel companies in the month of May 2008, steel prices in the country have remained almost stable during June-September 2008 quarter.
Thereafter to maintain the import price parity and limit steel imports, domestic steel manufacturers slashed steel prices in the first week of November 2008 in the range of about Rs 4,000 to Rs 6,000 per tonne. As a result, margins of steel players are under pressure in FY 09.
CARE Research estimates that during FY 09-11, demand for steel in the domestic market would grow at a CAGR of 8.0%. After registering a healthy CAGR of 11.9% during FY 04-08, the growth would slow down due to the impending downturn in the manufacturing sector and lower economic growth rate. Steel demand from the construction sector is expected grow at a lower CAGR of 9.5%. Poor performance of automobiles sector is expected to result in a fall in steel demand from this sector in FY 09 and remain more or less stable in the narrow range of 2.1 to 2.3 mn tonnes till FY 11.
Internationally, contract prices of coking coal are expected to come down by about 40-50% for the year 2009-10. Also, expected decline in international contract prices of iron ore would lead NMDC to revise domestic iron ore prices downwards.
This is expected to provide relief to domestic steel manufacturers especially the non-integrated ones by way of reduction in the cost of production and in turn to improve profitability in FY 10 compared to the previous year.
With global economic meltdown in 2008, global crude steel production in each month, post the month of August, has registered a negative growth on YoY basis. China produced about 502 mn tonnes of crude steel but the growth has slowed down to 2.6 per cent as compared to 15.8per cent recorded in CY 2007 and 18.8 per cent in CY 2006. India remained the fifth-largest crude steel producer, registering a growth of 3.7 per cent on YoY basis.
India’s finished steel production has increased from 35.4 mn tonnes in financial year 2003 to 52.8 mn tonnes in financial year 2008, registering a CAGR of 8.3 per cent. During the same period, finished steel consumption has grown at an incremental CAGR of 11.9 per cent. Demand of steel in the country has been growing at a multiplication factor of approximate 1.2x-1.3x of the growth rate of the economy.
Construction sector in the country is the largest consumer of steel and accounted for about 52 per cent of the total finished steel consumption in financial year 2008. India’s exports of finished steel have remained almost stagnant in the range of 4-5 mn tonnes in the past six years. But import of finished steel has grown from 1.5 mn tonnes in financial year 2003 to 6.5 mn tonnes in financial year 2008, registering a CAGR of 33.8 per cent. In financial year 2008, India turned into a net importer of finished steel as country’s import rose by almost 46 per cent on YoY basis.
India has self sufficiency in iron ore but for coking coal it has to mainly rely on imports. Iron ore production in the country has increased from 123 mn tonnes in FY 04 to 204 mn tonnes in FY 08, registering a CAGR of 13.9%.
In FY08, India produced about 204 mn tonnes of iron ore, out of which the country consumed about 100 mn tonnes and 104 mn tonnes of iron ore was exported out of which about 80% of exports were made to China.
Country’s coking coal import has increased almost two fold in the past six years. In FY 08, India imported about 22 million tonnes of coking coal. Coke which can be directly used in BF is also not available in plenty in the country. Imports of coke in the country have increased from 2.2 mn tonnes in FY 03 to 3.8 mn tonnes”
in FY 07.
Globally, unprecedented demand growth of steel from China in the past few years has played a major role in the movement of international steel prices. Till the first half of year 2008, globally, steel prices showed a rising trend. Post this period, due to global economic meltdown, steel prices have softened to the extent of US$ 500-600 per tonne. Domestically, due to government interventions, steel producers were unable to hike steel prices in line with the rise in international steel prices. After decline in prices by steel companies in the month of May 2008, steel prices in the country have remained almost stable during June-September 2008 quarter.
Thereafter to maintain the import price parity and limit steel imports, domestic steel manufacturers slashed steel prices in the first week of November 2008 in the range of about Rs 4,000 to Rs 6,000 per tonne. As a result, margins of steel players are under pressure in FY 09.
CARE Research estimates that during FY 09-11, demand for steel in the domestic market would grow at a CAGR of 8.0%. After registering a healthy CAGR of 11.9% during FY 04-08, the growth would slow down due to the impending downturn in the manufacturing sector and lower economic growth rate. Steel demand from the construction sector is expected grow at a lower CAGR of 9.5%. Poor performance of automobiles sector is expected to result in a fall in steel demand from this sector in FY 09 and remain more or less stable in the narrow range of 2.1 to 2.3 mn tonnes till FY 11.
Internationally, contract prices of coking coal are expected to come down by about 40-50% for the year 2009-10. Also, expected decline in international contract prices of iron ore would lead NMDC to revise domestic iron ore prices downwards.
This is expected to provide relief to domestic steel manufacturers especially the non-integrated ones by way of reduction in the cost of production and in turn to improve profitability in FY 10 compared to the previous year.
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