Annual Report for 2011-2012 - Vizag Steel

30 th Annual Report 2011-12
MANAGEMENT DISCUSSION AND ANALYSIS
REPORT FOR 2011-12
Annexure - I
1. INDUSTRY STRUCTURE AND DEVELOPMENTS
1.1. Global Economic Environment:
As per International Monetary Fund (IMF) report on world economic outlook - April 2012, after suffering
a major setback during 2011, global prospects are gradually strengthening again, but downside risks
remain elevated. IMF report further states that Global growth is projected to drop from about 4% in
2011 to about 3.5% in 2012 because of weak activity during the second half of 2011 and the first half
of 2012. Policies directed at real estate markets can accelerate the improvement of household balance
sheets and thus support otherwise anaemic consumption. Emerging and developing economies continue
to reap the benefits of strong macroeconomic and structural policies, but domestic vulnerabilities have
been gradually building up. Many of these economies have had an unusually good run over the past
decade, supported by rapid credit growth or high commodity prices.
1.2. Global Steel industry:
As per World Steel Association, Steel Industry directly employs more than two million people worldwide,
with a further two million contractors and four million people in the supporting industries. Considering
steel's position as the key product supplier to industries such as automotive, construction, transport,
power and machine goods, and using a multiplier of 25:1, the steel industry is at the source of
employment for more than 50 million people. World crude steel production has increased from 851 Mt
in 2001 to 1,527 Mt in 2011. (It was 28.3 Mt in 1900). World average steel use per capita has
steadily increased from 150 kg in 2001 to 220 kg in 2010. India, Brazil, South Korea and Turkey have
all entered the top 10 steel producers list in the last 40 years.
Global production capacity, trade policies of countries and the regional demand-supply scenario also
strongly influence the industry. Steel producers may attempt to reduce the impact of cyclicality through
various measures, such as diversification of manufacturing operations to various geographies (preferably
emerging markets with low-cost operations), vertical integration into raw material production,
diversification of customer base and focus on value-added products etc.
1.2.1. Global Steel Production:
Global crude steel production (of the 64 countries reported) in 2011 was approximately 1,490 Mt according
to the World Steel Association Crude Steel Production 2011 ("WSA"), while global apparent steel
consumption (which reflects the deliveries of steel to the marketplace from domestic steel producers
and imported steel) of finished steel was 1,373 Mt (WSA Short Range Outlook, Apr. 2012).
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