India’s contribution to the global steel consumption is forecast to increase marginally by 0.5 percentage point in 2011, mostly due to huge spends proposed by the government as well as active participation by private players on infrastructure development.
Construction projects accounts for about 20 per cent of the country’s total steel consumption.
Brussels-based World Steel Association (WSA) has forecast that India’s share in world steel consumption will to rise to 5.48 per cent by 2011, which will come to 71.5 million tonnes (mt). During the current year, the country is estimated to contribute 5.08 per cent, or 62 mt, to the global steel consumption. In 2009, India’s contribution was 4.9 per cent, or 55.2 mt.
“Healthy growth in steel consumption is possible in the next couple of years as the government will continue to focus on creaky infrastructure,” said S K Gupta, director of JSW Steel.
During the Eleventh Five-Year Plan (2007-12), India plans to spend $514 billion, with private firms contributing 36 per cent, to overhaul the country’s weak infrastructure, an obstacle to achieving faster growth in Asia’s third largest economy.
But, for the entire decade between 2011 and 2020, the country will require $ 1.7 trillion to meet its infrastructure needs. Global investment and banking firm Goldman Sachs had earlier estimated an investment of $620 billion for the purpose, while the government projected a requirement of $500 billion during the 11th Plan period. Private companies were estimated to pump in $1 trillion between 2012 and 2017, an independent analyst said. This means steel consumption in the country will go up as growth in infrastructure is directly linked with the demand for steel. Steel demand keeps pace with gross domestic products growth.
However, JSW’s Gupta maintains a conservative approach and forecasts that the demand for steel will rise 5-6 per cent.
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“China’s infrastructure is 10 times better than us, which drives growth of its neighbouring country, while we are at the rock bottom. Now, the government is focussing on infrastructure which will surely drive the demand for steel,” Gupta said.
Meanwhile, WSA has projected a strong resumption in apparent steel consumption in India over the next two years. It has forecast 13.9 per cent and 13.7 per cent growth in apparent steel consumption in 2010 and 2011, respectively.
According to a report by the steel ministry, the country’s steel consumption increased by about 8 per cent to 56.3 mt in 2009-10, from 52.3 mt in the previous year.
“India is likely to consolidate its position further in the global steel industry with its contribution to incremental consumption increasing from 6 per cent in 2010 to 13 per cent in 2011. This reaffirms our positive view on India’s steel consumption and supports our belief that the growth in consumption will return to trend levels of 12-14 per cent over the next couple of years,” said Abhay Laijawala, a steel analyst with Deutsche Equities India.
While the association firmly believes that the global steel industry is on a path to recovery, it also forecasts that the revival in the worldwide demand for the commodity will be led by strong growth in BRIC economies, which will constitute 43 per cent of the incremental consumption in 2010. BRIC consists of Brazil, Russia India and China.
Besides, the global steel consumption in 2010 will rise by 10.7 per cent to 1,241 mt, surpassing the pre-recession level of 2007, says WSA in its forecast.