”Steel demand and associated production in the BRICK (Brazil, Russia, India, China and Korea) regions, continued to be a key driver of growth in 2010. We anticipate that India particularly will witness unprecedented growth in the coming decade.”
Mike Elliott, Global Mining & Metals Leader, EY
Both China and India's domestic steel demand not only survived the economic slowdown, but they also grew at a remarkable rate. China accounted for 45% of steel production in 2010 and India was recently confirmed as the world's fifth largest steel producer.
On the back of predictions that India will become the second largest steel producer globally in coming years1, comes significant opportunities for potential investors. Sufficient iron ore reserves, low per capita steel consumption and strong demand for steel gives India a real competitive edge over other emerging economies.
India is ripe for opportunity and investment
India is the world's fourth-largest iron ore producer, with sufficient iron ore reserves to meet expected steel demand. Not surprisingly, the steel growth potential in the country is already attracting many global steel players to India.
We expect the Indian steel industry to continue to experience robust growth, with future demand boosting India's per capita consumption of steel to far higher levels.
The global outlook is positive
In 2011, global steelmakers are hoping for a more stable rate of recovery in demand. This will be dependent on whether there is an increase in consumer spending and business investment, to compensate for the potential lessening of government fiscal stimuli.
Due to the sovereign debt crisis of many developed countries, there has been a marked shift from stimuli to austerity.
In addition, the massive rise in oil prices inspired by political turmoil in the Middle East, coupled with the recent catastrophic events in Japan, increases the risks of a slowdown in growth during 2011.
Global trade is estimated to grow by 5.7% in 2011, which is a significant softening from 2010 when global restocking fuelled an 11.5 % increase.2
The future of both the developed and the developing world will be governed by different sets of challenges and issues.
The emerging markets of China and India will continue to witness strong growth in their steel industries due to robust demand for construction and civil engineering, automotive and mechanical engineering. The growth of developed markets however will be more dependent on supply-side response, innovative product offerings and substitutions.
The key driving factor for the profitability of all steel players will ultimately depend on more tightly managed operating expenses and capital expenditure.
In this report, we take a close look at the major industry trends from 2010, and provide further insight on the following areas:
1 The World Steel Association
2 “The world in figures, Industries, Business Environment”, Economist Intelligence Unit, 22 November 2010