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SUJANA METAL PRODUCTS LIMITED<br />
MANAGEMENT DISCUSSION AND<br />
ANALYSIS REPORT<br />
The Management of <strong>Sujana</strong> Metal Products<br />
Limited presents its Analysis Report covering the<br />
performance and outlook of the Company<br />
1. INDUSTRY STRUCTURE AND<br />
DEVELOPMENTS:<br />
Global Economy<br />
Overview<br />
The global economy expanded by 5.0% in<br />
2010 as against 0.5% in 2009. This recovery<br />
was characterized by:<br />
- Moderate growth in advanced<br />
economies, spurred by stimulus<br />
measures. Private consumption which<br />
fell sharply during the crisis picked up.<br />
- Growth in emerging and developing<br />
economies remained robust buoyed<br />
by resurgent capital inflows due to<br />
abundant global liquidity and strong<br />
domestic demand.<br />
- Global liquidity improved, credit spreads<br />
narrowed, equity and debt capital<br />
markets opening up enabling several<br />
corporations to raise capital to meet<br />
funding requirements.<br />
Challenges<br />
Pockets of vulnerability persisted; real-estate<br />
markets and household incomes remained<br />
weak in some major advanced economies.<br />
Volatility and uncertainty re-emerged in Euro<br />
area.<br />
Concerns about banking sector losses and<br />
fiscal sustainability triggered by crisis in<br />
Ireland, Spain. Greece and Portugal led to<br />
unprecedented widening of credit spreads for<br />
these countries.<br />
The turmoil in mid-2010 in the Euro zone led<br />
to a spike in global risk aversion and scaling<br />
back of capital allocation by fund managers<br />
to emerging markets. However, during the<br />
recent bout of turbulence, the financial stress<br />
was limited primarily to the periphery of the<br />
Euro area. Quantitative easing and stimulus<br />
packages by several countries created huge<br />
liquidity in financial markets and Central banks<br />
in emerging economies faced the challenge of<br />
high inflation and started pursuing a hawkish<br />
monetary policy by raising reserve ratios and<br />
hiking policy rates.<br />
Natural disasters across the globe posed<br />
a significant challenge for global economic<br />
growth. Floods, earthquakes and drought<br />
among others took a massive toll on human<br />
life, resulting in wealth erosion.<br />
GDP Growth<br />
2009 2010<br />
Global (0.50)% 5.0%<br />
Advanced economies (3.40)% 3.0%<br />
Emerging economies 2.70% 7.3%<br />
Size of the global<br />
economy (US$ tr)<br />
Source : IMF<br />
Global Steel Industry<br />
57.90 62.90<br />
The CY 2010 could be rated as the year<br />
of broad based recovery, in terms of<br />
economic revival, steel production, trade and<br />
consumption, except the threat of sovereign<br />
defaults in parts of Europe. Besides, weather<br />
extremities namely extreme heat and cold<br />
waves, drought, floods, cyclones among<br />
others are also causes of concern.<br />
The Global Steel Industry reached a new high<br />
in 2010 after a disastrous 2008. The global<br />
demand growth was at 13% after a steep fall<br />
in 2008. Asia was the leading steel producer<br />
with a 64% share in the global crude steel<br />
production China was the largest producer<br />
with a 44% share, India ranked fifth in world<br />
crude steel production (Source : World Steel<br />
Association/ISSB).<br />
Production<br />
In 2010 global steel production grew 15%,<br />
to 1,414 MnT. The growth is significant<br />
considering the huge downslide in steel<br />
production and consumption in the last quarter<br />
of 2008 (due to the global economic crisis).<br />
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