Will India replicate China’s previous growth rate?
ΑRT 1646 8march2016
BLOOMBERG INTELLIGENCE MARCH 8, 2016
This analysis is by Bloomberg Intelligence analyst Yi Zhu. It appeared first on the Bloomberg Terminal.
Is India’s steel industry ready to take the torch from China?
As Prime Minister Narendra Modi pushes for improvements in India’s infrastructure, the nation’s steel consumption is set to accelerate. China’s demand for steel, meanwhile, is retreating from the double-digit growth rates of the past 10 years as Beijing tries to shift the economy to focus on domestic consumption rather than exports. Now the question is whether India is ready to take the steel torch from China. To do so, India would need better regulations, power availability and other infrastructure.
Photographer: Andrey Rudakov/BloombergSteel-output growth may accelerate on Indian government spending
India may accelerate production of crude-steel output as the government of Prime Minister Narendra Modi pushes for faster development of infrastructure and affordable housing. Capacity will rise to 142 million tons by 2017, up more than 40% from 2014, according to the five-year plan for 2012-2017. Output growth has slowed in the past four years, mainly due to delays in securing environmental clearances for projects. India plans to increase capacity to 300 million tons by 2025.
India’s steel demand forecast to grow at 10.3% a year until 2017
India’s steel consumption is poised to accelerate as the country invests in rural infrastructure and manufacturing growth jumps from the current rate of 8% to as much as 12% in coming years. Demand for steel is expected to rise 10.3% a year before 2017, according to India’s 12th Five-Year plan. Its finished steel use per capita was 59 kilogram in 2014, or 12% the rate in China and 27% of the global average. That leaves room for India to play catch up as infrastructure projects are implemented.
Lower iron-ore prices hurt India’s miners, help its steelmakers
Indian steel companies can now import high-quality iron ore at about the same cost as lower-quality, domestic feedstock, thanks to falling global prices. The situation is hurting Indian miners while boosting margins at the nation’s steel mills. India had raised export duties on iron ore, motivated by concerns about the availability of the raw materials for its steelmakers. The country became a net-importer of iron ore in July 2014. The export tax will be scrapped according to the government’s latest federal budget.
India’s urbanization effort is likely to push demand for steel
India’s push to double its urban population by 2050 and increase the share of people living in cities will drive steel demand. The country’s urbanization rate was 32% in 2014, lower than China’s 54%, and will rise to 50% in 2050, based on United Nations forecasts. China’s apparent crude steel demand more than doubled from 2005 to 2014, while the country’s urbanization rate rose to 55% from 43%. This implies the potential demand growth for India if its urbanization target is reached.
Indian steel producers may be protected by higher import tax
India may increase import taxes on steel products and file anti-dumping charges against Chinese steel mills to protect domestic producers. The country has imposed a minimum import price to limit a surge in cheaper products from China. Indian steel producers have 37 million tons of new capacity under construction or planned, according to Bloomberg Intelligence analysis. That’s equal to 35% of capacity as of year-end 2014. The tally includes 14.5 million tons due to come online by end-2016.
Indian steel mills may face power bottleneck to expand capacity
The availability of stable power supply and infrastructure for logistics may be key issues for Indian steel mills to expand capacity. Steel producers may face power constraints stemming from supply deficits and underdeveloped transmission lines. In addition, while the country is coal-resource rich, it relies on imports for coking coal, the key fuel for steelmaking. Such imports rose 8% in 2015 to 46 million tons. Tata Steel imported more than half of its total required coking coal last year.
Foreign investments in India steel plants face regulatory maze
Japanese, Korean and Chinese steel companies interested in building plants in India must navigate a regulatory maze. Posco in July shelved its plan for a 12 million-ton-a-year steel plant in Odisha state that had been stalled for a decade due to difficulties acquiring land and iron ore mining leases. ArcelorMittal scrapped plans for a steel mill in the same state in 2013 for similar reasons. India’s government will have to clear away such obstacles to attract the foreign investment it wants.
ΑRT 1646 8march2016
BLOOMBERG INTELLIGENCE MARCH 8, 2016
This analysis is by Bloomberg Intelligence analyst Yi Zhu. It appeared first on the Bloomberg Terminal.
Is India’s steel industry ready to take the torch from China?
As Prime Minister Narendra Modi pushes for improvements in India’s infrastructure, the nation’s steel consumption is set to accelerate. China’s demand for steel, meanwhile, is retreating from the double-digit growth rates of the past 10 years as Beijing tries to shift the economy to focus on domestic consumption rather than exports. Now the question is whether India is ready to take the steel torch from China. To do so, India would need better regulations, power availability and other infrastructure.
Photographer: Andrey Rudakov/BloombergSteel-output growth may accelerate on Indian government spending
India may accelerate production of crude-steel output as the government of Prime Minister Narendra Modi pushes for faster development of infrastructure and affordable housing. Capacity will rise to 142 million tons by 2017, up more than 40% from 2014, according to the five-year plan for 2012-2017. Output growth has slowed in the past four years, mainly due to delays in securing environmental clearances for projects. India plans to increase capacity to 300 million tons by 2025.
India’s steel demand forecast to grow at 10.3% a year until 2017
India’s steel consumption is poised to accelerate as the country invests in rural infrastructure and manufacturing growth jumps from the current rate of 8% to as much as 12% in coming years. Demand for steel is expected to rise 10.3% a year before 2017, according to India’s 12th Five-Year plan. Its finished steel use per capita was 59 kilogram in 2014, or 12% the rate in China and 27% of the global average. That leaves room for India to play catch up as infrastructure projects are implemented.
Lower iron-ore prices hurt India’s miners, help its steelmakers
Indian steel companies can now import high-quality iron ore at about the same cost as lower-quality, domestic feedstock, thanks to falling global prices. The situation is hurting Indian miners while boosting margins at the nation’s steel mills. India had raised export duties on iron ore, motivated by concerns about the availability of the raw materials for its steelmakers. The country became a net-importer of iron ore in July 2014. The export tax will be scrapped according to the government’s latest federal budget.
India’s urbanization effort is likely to push demand for steel
India’s push to double its urban population by 2050 and increase the share of people living in cities will drive steel demand. The country’s urbanization rate was 32% in 2014, lower than China’s 54%, and will rise to 50% in 2050, based on United Nations forecasts. China’s apparent crude steel demand more than doubled from 2005 to 2014, while the country’s urbanization rate rose to 55% from 43%. This implies the potential demand growth for India if its urbanization target is reached.
Indian steel producers may be protected by higher import tax
India may increase import taxes on steel products and file anti-dumping charges against Chinese steel mills to protect domestic producers. The country has imposed a minimum import price to limit a surge in cheaper products from China. Indian steel producers have 37 million tons of new capacity under construction or planned, according to Bloomberg Intelligence analysis. That’s equal to 35% of capacity as of year-end 2014. The tally includes 14.5 million tons due to come online by end-2016.
Indian steel mills may face power bottleneck to expand capacity
The availability of stable power supply and infrastructure for logistics may be key issues for Indian steel mills to expand capacity. Steel producers may face power constraints stemming from supply deficits and underdeveloped transmission lines. In addition, while the country is coal-resource rich, it relies on imports for coking coal, the key fuel for steelmaking. Such imports rose 8% in 2015 to 46 million tons. Tata Steel imported more than half of its total required coking coal last year.
Foreign investments in India steel plants face regulatory maze
Japanese, Korean and Chinese steel companies interested in building plants in India must navigate a regulatory maze. Posco in July shelved its plan for a 12 million-ton-a-year steel plant in Odisha state that had been stalled for a decade due to difficulties acquiring land and iron ore mining leases. ArcelorMittal scrapped plans for a steel mill in the same state in 2013 for similar reasons. India’s government will have to clear away such obstacles to attract the foreign investment it wants.
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