The world crude steel production fell 1,344 mn tonnes in CY 2007 to 1329 mn tonnes in CY 2008 … China continues to dominate

Global Setting

Crude steel production in the world has reached a level of 1,329 mn tonnes in CY 2008 but declined by 1.1% on-year. During the period CY 2001-2008, the world crude steel production has grown at a compound annual growth rate (CAGR) of 7.9%. The growth in crude steel production was driven primarily by emerging economies like China and India, which recorded a CAGR of 18.7% and 10.6% respectively during the same period. With the economic crisis world in CY 2008, world crude steel production in each month after the month of August, has registered a negative growth on-year. China produced about 502 million tons of crude steel, but growth has slowed to 2.6% compared to 15.8% in Cyprus in 2007 and 18.8% in CY 2006. India remained the fifth largest producer of crude steel, an increase of 3.7% on-year.

Domestic Steel Industry

The production of finished steel in India has increased from 35.4 mn tonnes in FY 03 to 52.8 tons in FY 08 min, registering a CAGR of 8.3%. During the same period, finished steel consumption has grown at a CAGR increase of 11.9%. Steel demand in the country has been growing at a 1.2x multiplication factor of approximately 1.3 times the growth rate of the economy. Construction industry in the country is the biggest consumer of steel and accounted for 52% of total finished steel consumption in FY 08. India's exports of finished steel have remained virtually stagnant in the range of 4-5 mn tonnes in the last six years. However, the finished steel imports rose from 1.5 tons in FY 03 to 6.5 mn mn tonnes in FY 08, registering a CAGR of 33.8%. In fiscal year 08, India became a net importer of finished steel imports as the country increased by nearly 46% on-year.

Scenario Input

India is self-sufficient in iron ore, but for coking coal has to rely mainly on imports. Ore production iron in the country has increased from 123 tonnes in FY 04 to 204 mn tonnes in FY 08 min, registering a CAGR of 13.9%. In FY08, India produced some 204 million tonnes of iron ore, of which the country consumes about 100 tons min and 104 million tonnes of iron ore is exported outside which approximately 80% of exports were to China. Import of coking coal country has increased almost twice in the last six years. In the FY 08, India imported about 22 million tonnes of coking coal. Coca-Cola that can be directly in BF is also not available in abundance in the country. Imports of coking coal in the country have increased from 2.2 tons in FY 03 to 3.8 mn tonnes in FY min 07.

Prices

Globally, the growth of the unprecedented demand for steel in China in recent years has played an important role in the international movement of steel prices. Until the first half of CY 2008, worldwide steel prices showed an upward trend. Publish this period due to economic crisis Globally, steel prices have softened to the extent of U.S. $ 500-600 per tonne. Nationally, due to interventions by the government, steel producers were unable to hike steel prices in line with rising international steel prices. After voluntarily reduced prices for steel companies in the month of May 08, steel prices in the country have remained stable during June-September 2008 quarter. Thereafter to maintain price parity import and limit steel imports, domestic steel makers cut prices of steel in the first week of November 2008 in the range of about Rs.4, 000 to Rs.6, 000 per tonne. As a result, the margins of steel players are under pressure in FY 09.

Steel demand is expected slowing, but growing at a CAGR of 8.0% in FY09-11

CARE Research estimates that during the 09/11 fiscal year, steel demand in the market country will grow at a CAGR of 8.0%. After recording a healthy 11.9% CAGR during FY 04-08, the growth will slow due to the recession imminent in the manufacturing sector and lower economic growth rate. Steel demand in the construction sector is expected to grow at a lower CAGR of 9.5%. The low performance of the car industry will suffer a drop in steel demand in this sector in FY 09 and will remain more or less stable in the narrow range of 2.1 to 2.3 tons through FY 11 min. Internationally, prices for coking coal contract is expected to decrease by about 40-50% for the year 2009-10. Moreover, the expected decline in international contract prices of iron ore would NMDC to revise prices of domestic iron ore down. It expected to provide relief to domestic steel makers particularly non-integrated by way of reduction in production cost and in turn to improve profitability in fiscal year 10 compared with the previous year.

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