Steel tubes industry set for 30% growth

The Rs 200 crore steel tubes industry is poised for a 30 per cent growth in the wake of a growing demand in the infrastructure and construction sector, mainly in scaffolding in buildings.

Scaffolding accounts for 20 to 25 per cent of the total tube consumption. Besides, the growing number of large infrastructure projects will multiply the demand in future, said experts.

The sector has grown dramatically in the recent past at a record 20 per cent, owing to several infrastructure projects lined up by the government and the private sector. It was growing at a slower 6 per cent growth three years ago.

The use of steel rods and bars in stadia, railway stations, multiplexes and gas pipelines has been replaced with steel tubes, fuelling further growth potential for the tube industry. "The infrastructure development ahead of the Asian Games scheduled in 2010 will drive the demand for steel tubes immensely," said Sanjay Gupta, managing director of Bihar Tubes, which is set for a capacity expansion.

"The demand for branded HR and CR tubes is growing by leaps and bounds, not only in the domestic market, but in the exports market as well. The growth potential in the branded segment is much higher than the unbranded one," he added.

Of the total 2.5 lakh tonne of overall domestic demand for steel tubes (hot rolled and cold rolled), branded producers manage to contribute 1 lakh tonne, which is primarily met by the industry leaders including Tata, Surya Roshini, Jindal, Zenith and Bihar Tubes.

The balance 1.25 lakh tonne is supplied by big but unbranded players. In addition, cold-rolled tubes contribute about 40 per cent, about 1 lakh tonne, to the total steel tube production.

According to market sources, branded tubes are quoted at about Rs 5,000 higher than the price of unbranded steel tubes, which are sold at Rs 30,000 a tonne in the domestic market. Cold-rolled tubes in the domestic market go at the rate of Rs 40,000 a tonne, while structural tubes are sold in the range of Rs 200,000 a tonne.

The sector, which is mainly dominated by non-branded players with a market share of about 60 per cent, is playing a dynamic role in determining the future of construction, as steel rods are being gradually replaced by steel tubes, owing to their aesthetic looks and light weight.

However, despite the immense potential in the tube industry, it has failed to meet the rising demand, owing to high raw material prices. Currently, raw materials, such as HR coils, CR coils and stainless steel coils, are sold at a 10 to 15 per cent premium, which is hurting the industry, experts said.

The Delhi-based Bihar Tubes, has proposed an expansion plan with an outlay of Rs 110 crore under which it will set up a backward integration plant in Sikandrabad, Uttar Pradesh, a greenfield project in Khopoli, Maharashtra, and a 12-inch pipe manufacturing mill in Uttaranchal, with an installed capacity of 200,000 tonne, 50,000 tonne and 24,000 tonne per annum respectively.