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Frost & Sullivan: India set to become 2nd largest producer of Crude Steel by 2015 - expanding construction and infrastructure sectors set to further boost steel demand

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Mumbai, India - November 26, 2012 (www.investorideas.com newswire) Frost & Sullivan reports: Steel is one of the most important industrial sectors in a country and due to its wide application across sectors its growth and consumption are directly proportional to the country's GDP. The steel sector contributes to nearly 2 percent of the country's GDP and employs over 5 lakh people.

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Market Insight from Frost & Sullivan finds that the per capita steel consumption rose from 38 kg in 2005-06 to 57 kg in 2011-12. In 2011, overall steel consumption in India was around 67 million metric tons (MT) per annum and the GDP growth was approximately 8 percent, compared to 30.7 million MT per annum consumption of steel and GDP growth of approximately 3.8 percent a decade ago, in 2001. Favorable government policies for this sector along with the country's economic growth have contributed to the steel sector's fast paced growth.

Production of crude steel increased from 27.3 million MT to 71.3 million MT in the last 10 years at a compound annual growth rate (CAGR) of 10 percent due to advancements in traditional steel making. Electric arc and induction furnaces have been the key drivers for increase in crude steel production. Indian crude steel production capacity is expected to reach 112.5 million MT by FY 2016. In 2010-11, total installed capacity stood at 78 million MT and capacity utilization was in the range of 84 percent.

"Currently India is the world's fourth largest producer of crude steel and if all planned capacity expansion projects become operational, it is expected to become the world's second largest producer by 2015", said Venkatesan Subramanian, Director, Metals & Minerals, Frost & Sullivan. He added, "Around 300 MoUs have been signed with various states for planned capacity of around 488.56 million MT by 2020 and major investments are planned for the states of Orissa, Jharkhand, Karnataka, Chhattisgarh and West Bengal . The intended steel capacity build-up in the country is likely to result in an investment of approximately INR 5,000-10,000 billion by 2020."

Traditionally, construction and infrastructure sector together have had the highest demand for steel (more than 60 percent) in the country. Indian finished steel production in 2011-12 stood at 70.32 million MT and is forecast to touch 92.29 million MT in 2015-16.

"Among steel intensive industries in India , construction registered the highest growth rates over the past consecutive 5 years. Manufacturing is the second highest steel consumer segment followed by automotive, both of which are poised to witness impressive growth over the future", noted Subramanian.

The factors driving the growth of this sector include:

Expanding construction, automotive and other down stream segments
Overall increase in manufacturing due to global entrants
Availability of large consumer base due to India's demographics
Capacity expansions planned by major steel producers
Availability of adequate iron ore reserves to meet domestic demand

Increasing imports and competition from international steel manufacturers in recent years due to price considerations, specific quality, grades and sizes, mainly from China and the CIS (Commonwealth of Independent States) countries is a growing challenge for the sector. Moreover, delayed clearances from authorities for mega projects due to regional issues, environmental and land concerns, inadequate infrastructure and inefficient transport systems, fluctuations in raw material prices and insufficient availability of power and coking coal are posing threats that may prevent the sector from reaching its potential.

To tackle these emerging competitive challenges the Indian Government and steel manufacturers need to leverage available opportunities such as high domestic demand, unexplored rural markets, abundant iron ore and coal availability, growing exports, lesser costs for per ton production, and availability of skilled labor, etc.

If you are interested in knowing more about the Metals & Minerals Practice, please send an e-mail to Ravinder Kaur / Priya George, Corporate Communications, at ravinder.kaur@frost.com / priyag@frost.com, with your full name, company name, title, telephone number, company e-mail address, company website, city, state and country.

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Media Contact:

Ravinder Kaur
Corporate Communications South Asia
M: +91 99401 41714
P: +91 44 6681 4080
E: ravinder.kaur@frost.com

Priya George
Corporate Communications South Asia
M: +91 98403 55432
P: +91 44 6681 4456
E: priyag@frost.com

Nimisha Iyer
Corporate Communications South Asia , Middle East & North Africa
M: +91 98200 50519
P: +91 22 6607 2004
E: niyer@frost.com
www.frost.com

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