Lakshmi Mittal sees opportunity for growth in India

Lakshmi Mittal, chairman and CEO, Mittal Steel Company, does not consider China as a threat to the global steel industry.

According to him, India is a market of opportunity due to its large population and low per capita steel consumption.

Speaking at the World Steel Dynamics Annual Steel Success Strategies Conference in New York on Tuesday, Mittal said he was now less concerned that the Chinese industry is a threat having witnessed the Chinese government's stringent control on capacity increase.

He was responding to concerns that given China's rapid capacity expansion moves, the country might soon become a net exporter.

He also said China was not a natural exporter of the metal as it had a number of weaknesses, including a dependency on iron ore imports and high energy costs, which made it difficult to argue the case for any long-term structural advantage.

Referring to India, he said, "The growth opportunity is certainly there." If economic reforms are implemented, there is "a strong possibility for India to continue to drive global steel demand growth".

Mittal said the steel industry proved in 2004 that it has the ability to create considerable value. Now the focus must be on ensuring that the sector can sustain this.

Mittal highlighted two fundamental changes that have occurred in the industry's dynamics in the recent years. For one, global demand has entered a new growth era largely driven by China's industrialisation. Secondly, significant consolidation has happened leading to a stronger industry.

Mittal said the biggest opportunity for GDP-driven growth in steel demand in the future would come from the BRIC countries. "Provided the economies of these countries continue to develop at the anticipated growth rates, the demand growth for steel has the potential to continue at around 3-5 per cent over the foreseeable future," he said.

He said better management of the supply chain would help address cyclicality, adding this would come with further consolidation. "Today's softening of the market is not due to any sudden drop in demand but due to an inventory overhang situation. This situation can be better managed with consolidation of the industry."

Mittal said good progress had been made towards consolidation, particularly in North America and Europe where approximately 60 per cent of the market is now produced by the top five companies. "Both of these markets have made significant progress towards consolidation," he said.

However, the overall industry is highly fragmented and needs further consolidation, he added.