Adam Szewczyk, Head, Data Managementds, worldsteel

15 January 2019

The January to November crude steel production statistics released by worldsteel on 20 December 2018 show that India has become the second largest steel producer in the world, overtaking Japan for the second month in a row, with a growth rate of 4.9%.

The growth in steel production is supported by fast-growing steel demand. According to worldsteel’s October Short Range Outlook, it is likely that India will also become #2 in steel use by the end of 2019 as its steel demand is expected to grow by 7.3%.

The Indian steel industry, after recovering from the twin shocks of demonetisation and the Goods and Services Tax (GST) reform, is one of the few bright spots for the world’s steel industry in what is forecasted to be a lower growth era.

What is driving India’s steel demand?

India’s apparent steel use per capita for finished steel products stood at 66.2 kg, way below the world average of 212.3 kg in 2017, which suggests that India has a huge unrealised potential for steel demand growth.

Recently, India has been trying to unleash this through an extensive reform agenda to clear institutional bottlenecks. Also, there is an ongoing push for infrastructure development.

These factors, along with the favourable demographics, are improving the macroeconomic fundamentals, which translate into sustained growth in steel use.

A worldsteel study of India, conducted in collaboration with the Indian Steel Association and the support of Indian member companies, identifies the construction sector as a pan-India steel demand driver on the back of strong infrastructure development and housing demand, especially affordable housing.

Projects like industrial corridors (connecting existing industrial cities and develop manufacturing sectors) and Sagarmala (connecting states through waterways) will increase India’s connectivity, reducing logistical costs of transportation across Indian states.

The Smart Cities initiatives will further boost urban infrastructure investment. There are currently 99 smart cities planned across India.

The outlook for India’s manufacturing sector, which has been lagging behind the service sector as a growth driver, should improve.

Firstly, the Make in India initiative, which aims to transform India into a global design and manufacturing hub, will support the further development of steel using sectors along the industrial and freight corridors.

Secondly, many states are expected to develop automotive and ancillary industries, to be a global auto hub for small cars with a focus on exports. Lastly, some states are also expected to strengthen their mechanical machinery sector.

All these factors point to a high potential for steel demand growth in India, but how fast the potential can be realised will depend upon whether India can successfully implement both its reform agenda and infrastructure plans. 

Your opinion would be much appreciated.

Add your comment here:

  • Hi, Adam Szewczyk
    Q1) what is your current designation at the world steel?

    Last time, the blog had shown Adam Szewczyk, Head, Economic and Statistical Analysis, World Steel Association (worldsteel).

    Q2) Can I make a news report out of it?

  • A wonderful analysis of India’s steel outlook in the coming years. My compliments to Mr. Adam Szewczyk, Head, Data Management world Steel, for his in-depth knowledge of the growth drivers for boosting steel demand in India.
    The construction sector in India especially, and affordable housing has the potential to boost steel demand to a great extent.

  • Good analysis and encouraging statistics for India. It’s a very positive sign that apart from infrastructure, steel use is growing in housing sector and that too surprisingly in affordable housing. But I really doubt this – “*According to worldsteel’s October Short Range Outlook, it is likely that India will also become #2 in steel use by the end of 2019 as its steel demand is expected to grow by 7.3%.*” Projecting number 2 in steel use looks unrealistic. From a meek 66 kg to staggering 400+kg?

  • Thanks for your comment, Deepak. #2 refers to the absolute volume of steel demand in 2019, as presented in the Short Range Outlook October 2018 press release. The low steel use per capita in India, about 70 kg compared with a world average of more than 200 kg, and the structure of steel use in India, where construction dominates, which is typical for developing nations, leave a lot of opportunities for development.

  • That is quite a optimistic approach. To initiate the positive direction, we should not forget the imbalance of demand and supply constraints . 1.Government policies are not supporting, 2.RBI and Banks are not in good state to further support the market 3.Money flow has stopped 4.Poor infrastructure development

  • Spot on analysis Adam. I see India’s growth in the steel space as a fantastic long term investment opportunity.
    The New India, will transition from a Linear Economy to a Circular Economy…( resource efficiency / waste utilization ). The backbone of the Indian economy is its steel industry, and it plans to grow from 130MT/A to 300MT/A by 2030.
    Australian Investors have an opportunity to invest directly in the fastest growing economy in the world, through a publicly listed Australian Company, Environmental Clean Technologies ( ECT ),, which will commercialize it’s innovative Matmor / Coldry tech’s in partnership with India’s largest Gov owned Lignite and Iron Ore producers NLC & NMDC, commencing with the construction of an Integrated Steel producing plant, which utilises it’s vast reserves of Lignite and waste fines ilo of expensive imported coking coal and lump Iron Ore.
    Final Board approval for the 30 Million Dollar R&D Pilot Plant expected to take place by the 31/1/19.

  • Thank you for your comment, Preetish. We will be providing more details on the 2020 steel demand forecast in our Short Range Outlook to be released in April.

  • As Head of Raw Materials at worldsteel, I will reply to your question regarding scrap availability. We understand that the Indian Government aims to promote the use and ensure the availability of scrap and is taking several steps towards meeting these objectives. These steps should certainly help improve the scrap collection and processing efficiency and the overall scrap availability in the country. For example, efforts are underway to set up auto and white goods shredding units in the country. One such unit is being set up by the state owned MSTC Ltd. with a tentative capacity of around 300,000 tonnes per annum.

  • Sluggish behavior in the auto industry is likely to affect the demand for steel products. After mid-2019, many manufacturing companies announced the temporary closure of operations. As per my analysis, Indian outlook for steel looks on the negative side for 2019.

  • Hi Kuldeep – Thank you for your comment. We suggest you consult our updated forecast when we issue our next Short Range Outlook in mid-October.

  • You have written an article in very good words, Hopefully in the future i'll be get a chance to see many such articles from you.

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