1. Next few months may augur well for steel industry

Next few months may augur well for steel industry

The recent report by CMIE indicates that of the 970 projects worth R10,000 billion announced in FY15, nearly 38% have commenced construction. It is well known that steel intensity per unit of investment in project construction is higher compared to the level in real estate and therefore constructional demand for steel will rise

By: | Published: September 1, 2015 12:09 AM

In the midst of a strong resentment by steel manufacturers against rising steel imports from China, Japan, Korea and CIS, all of whom (particularly China) are fighting the battle of depleting domestic demand through major export thrusts, the important question that underlies all other issues is the aspect of steel demand in the country. Is it also falling as is happening in all the major economies?

In Q1 of the current fiscal, steel consumption showed a growth of 7.1% over last year. Next month it was a deceleration and in the first 4 months the consumption rose by 5.6%. A look at the primary drivers of steel demand in India may provide an answer. The construction sector has a predominant role (around 60-62%) in boosting steel demand in the country. The sector grew at 2.5% in FY14, 4.8% in FY15. Currently the demand pull impact of the sector is uneven as both real estate and industrial project construction segments suffer from lack of orders aggravated by delayed projects, unsold new/upcoming houses, high cost of liquidity, poor growth in manufacturing leading to slow rise in employment affecting demand for fresh accommodation.

Recent announcement of 98 smart cities and affordable housing scheme and initial fund allotment for the purpose pose a big challenge for the state governments in making a coordinated approach and synergy with various internal departments so that along with land development, appropriate steps are taken towards provision of all required facilities like electricity, water supply, sewerage, road,   flyovers, bridges, rail and air network, employment opportunities, education, health and recreation facilities. The 5-year period of completion of this mini cityscape is likely to generate a good demand for steel.

The relatively easy steel availability with emphasis on steel-based structures for faster and earth quake resistant construction as well as life cycle cost advantages of steel should be the major deciding factors for choosing steel as a preferred choice of material. It would be the responsibility of all concerned to propagate the cause of steel in these gigantic endeavours. The aspect of space consideration in all the planned smart cities may encourage high-rise structures at least for housing, hospital building as well as lead to large span structures for other civic amenities thereby contributing to higher demand for steel.

As regards project construction, the recent report by CMIE indicates that of the 970 projects worth R10,000 billion announced in FY15, nearly 38% has commenced construction. It is well known that steel intensity per unit of investment in project construction is higher compared to the level in real estate and therefore constructional demand for steel would rise in Q2-Q4 of the current year.

It is also interesting to observe that the government has successfully concluded with Japan the part funding of Dedicated Freight Corridor project for which Japan would provide a loan of $618 million with an assured supply of the entire requirement of rails thus depriving the new Rail Mill at Bhilai to develop and supply this large tonnage. The announcement of constructing around 225 rail over bridges, which are mostly steel intensive construction, is good news for steel producers.

Combining these two positive factors, the growth of construction sector for the full FY16 may be placed at 6-7 per cent. The current growth of auto sector is encouraging in raising demand for HR/CR/Coated sheets /plates/round. It is good to see a rising market for value added steel. It would however continue to be a target sector for imported steel.

The engineering and processing industries are facing a stiff challenge from machinery and equipment imported from China and a few other developed countries. Similar is the fate of consumer durable industries other than passenger cars. The Q1 production data of 1.5% and 3.7% growth for capital goods and consumer durable segments are worrisome for steel industry. However, with more project implementation envisaged for Q3 and Q4, the situation is going to change for the better in the coming months.

The author is DG, Institute of Steel Growth and Development. Views expressed are personal.

  1. Hemen Parekh
    Sep 2, 2015 at 11:20 am
    DREAM HOUSE BY 2020 ? Shri Ravindra Waikar , Minister for Housing , Maharashtra Government , says ( DNA / 16 Aug 2015 ) : " We want to provide a dream house to everyone by 2020 . We won't compromise on the quality of construction . It will be at par with that of private builders . We are working on a mission mode " He is referring to planned construction of 5 lakh " affordable " houses ( flats ? ) , by 2020 No doubt , this is a very daunting task but it is possible if there is " Political Will " - which is evident from above statement of Shri Waikar Here are my few suggestions that Shri Waikar may want to consider : # SPECIFICATIONS * Carpet Area = 400 sq ft * Selling Price = Rs 10 lakhs ( Rs 2,500 / sq ft ) # LOCATIONS * Building Clusters to be located on the outskirts of cities ( important ) * 100 Clusters of 50 buildings ( each with 10 floors*10 flats/floor ) # LEGAL FRAME-WORK * A Special Purpose Vehicle ( SPV ) , named, Dream House Private Limited ( DHPL ) # INDUSTRY STATUS * Infrastructure Industry with 100 % FDI thru automatic route # SPV OWNERSHIP * 10 % equity by Maha Govt ( in lieu of land ) Maha Govt to p on this equity to land-owners * 90 % equity by WinSun Decoration Design Engineering Co ( China ) # SHARE CAPITAL * Rs 10,000 Crores # ROLE OF MAHARASHTRA GOVERNMENT * Acquire land ( under modified Land Acquisition Act )/hand over to SPV * Comprehensive Town Planning of each Cluster like a Smart City * Building Design / Drawings / Material Specs * Quality Control / Material Testing Lab at each site * A Project Monitoring Team at each site / Use of PERT * Site surveillance using CCTV cameras * Make available land for setting up 3D House Printing factories * Interconnection of site offices with HQ , thru VPN * Blanket permissions ( IOD / NOC etc ) issued in advance * OC based on certification from Site Project Manager * Maintenance of flats thru Coop Societies of each cluster # COMMERCIALS * Neither SPV , nor Maha Govt to pay any royalty to WinSun for transfer of technology * Maha Govt to act as the agency for allotment of flats to eligible public in Maharashtra thru a " Lottery System " * Selling Price of flats will be fixed by the Maharashtra Government once a year , based on a pre-agreed cost - escalation formula, which will be explained in detail on SPV web site Calculation of each upward revision shall be made public * SPV to hand over possession of flat to the allotee upon receipt of full payment * SPV shall not be permitted direct selling of any flat in Maharashtra * SPV would be free to set up factories in other States and be free to sell flats built there, thru Open Market # ROLE OF WinSun * Setting up of 20 factories for 3D Printing of flats * embling of 3D printed flats at sites * Transfer of 3D house printing technology to Indian project managers / site engineers / construction workers # TECHNOLOGY * 3D ( house ) Printing Technology developed / patented by WinSun > WHY WinSun ? # On 29 March 2014 , WinSun constructed TEN , 3D printed houses ( 200 sq meter each ) in Shanghai, each costing $ 4,800 ( approx Rs 3 lakh ! ) # On 17 July 2015 , using its 3D printing technology , WinSun built a 2 storey villa , in just 3 HOURS ! # WinSun holds 98 patents for construction materials # For 3D printing of houses , WinSun , mostly uses recycled construction materials # 3D house-printing technology saves, * 30% -60 % of building materials * 70 % of production time * 80 % of construction cost # Egypt Government has placed on WinSun , an order for supplying 20,000 pre-fabricated , 3D printed houses # In Egypt , WinSun will establish 12 Dream Factories ( to build pre-fabricated houses ) , within 2 years These factories will mostly use desert sand as its main construction material , which was found ideal for 3D printing of houses ! # In next 3 years , WinSun will set up ( in JV with local parties ) , similar factories in 20 countries , including Saudi Arabia , UAE , Qatar , Mexico , S. Korea , Russia , Morocco , Tunisia , and USA As someone has said : " It is OK to build castles in the air , as long as you know how to put foundation underneath , later on " Even if you are dreaming of building 5 lakh castles ! ----------------------------------------------------------------------------------- hemen parekh 02 Sept 2015 B2BmessageBlaster
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