KAMDHENU ISPAT LIMITED - Securities and Exchange Board of India

· In China and other Asian countries, demand is led by emphatic investment activities in infrastructure.
· Russia and other CIS nations are also witnessing strong internal demand.
· Iraq reconstruction work is expected to fuel further demand for steel over the next three years.
· China is consuming steel for its infrastructure with investments such as the “Three Gorges Project” on Yangtze
River as well as to build up infrastructure for Beijing Olympics in 2008 and the Shanghai Expo in 2010.
The demand supply gap is expected to increase and will drive steel prices north, even as the global steel industry is
not prepared for this demand onslaught.
Local Factors
The Indian government believes that India will become a developed nation by 2020 with a per capita GDP of
USD1540. Steel industry will play a leading role in achieving this target. Steel is poised for growth with abundant iron
ore resources and an established base for steel production in India. Production has already increased from 13.4 Mn
tones in 1991-92 to 38.4 Mn tones in 2004-05. While steel will continue to have a stronghold in traditional sectors
such as construction, housing and ground transportation, special steels will be increasingly used in hi-tech engineering
industries such as power generation, petro chemicals, and fertilizers. Steel will continue to be the most popular,
versatile and dominant material used in wide ranging applications. In fact, analysts have forecast that the Indian
steel sector will continue to witness growth in the next few years backed by domestic drivers such as infrastructure
and automobile demand. The abysmally low per capita consumption of steel at 20 kilograms (kg) in India as compared
with global majors will primarily drive demand
The continued thrust on infrastructure and related activities and their extension to rural India will provide a tremendous
boost to the steel industry. This will require huge material and capital infusions. The union budget for 2003-04
provided a major thrust through innovative funding mechanisms. The initiative covers:
· 48 new road projects at an estimated cost of Rs.400, 000mn; with a quarter of the roads being concretized,
· National Rail Vikas Yojana projects worth Rs.80, 000mn;
· Renovation/modernization of two airports and two seaports at an estimated cost of Rs.110, 000mn,
· Establishing two international convention centres at global standard for an estimated cost of Rs.10, 000mn.
The total cost of these projects is estimated at Rs.600, 000mn. In addition, the budget also announced funding for
the North-South and East-West corridors. This would provide a further Rs.26,000mn for highway development.
However, there may be a slowdown in the export markets in the coming months, partly due to additional capacities
in China going on-stream and the possibility of further trade actions in the US and the European Union restricting
imports from India.
D. Conclusion
Steel Products: Forecasted Parent Consumption/Demand
(‘000 tonnes)
2005-06 2006-07 2007-08 2008-09 2009-10
Longs (Regression with GDP method)
Bars and Rods 12214 12879 13593 14471 15465
Structurals
Flats (End use method)
3064 3252 3432 3654 3904
HR Plates 3061 3284 3500 3730 3974
HR Coils 11930 12865 13873 14960 16132
CR Coils 6256 6672 7117 7591 8096
GP/GC 2068 2153 2241 2333 2429
Source: CRIS INFAC
As we can see, the consumption pattern of steel, especially of long products, will remain on an upward trajectory
riding the back of increased spending on all construction and infrastructure related activities.
Economic growth is a key driver for steel industry growth. However, the government too spends substantial amounts
on infrastructure related activities irrespective of the state of the economy. In fact, historically the government has
upped its spending in the recessionary phases to generate employment and increase disposable incomes in the
hands of the people.
Increased spending on infrastructure will drive the steel sector – resulting in a boost for demand for steel . The
government has announced a total outlay of USD.13bn spread over a few years to develop roads, rails, airports and
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