Steel industry's prospect brighter in India:BCG

New Delhi, Mar 8 (UNI) The steel industry world wide will achieve significant growth of three to four per cent per year by the year 2015, reaching 1.5 billion tonnes to 1.7 billion tonnes annually.

Over the same period, sustained high prices for raw materials and increasing consolidation will help to stabilise steel prices, according to a study prepared by the Boston Consultng Group (BCG) on ''Beyond the Boom; the Outlook for Global Steel.'' Talking to newsperson on the release of the report, Sachin Nandgaonkar, Director, BCG said, ''India is currently among the top 10 steel producers in the world and is placed in a very good position to leverage the trends shaping the global steel industry.'' He said the local demand has entered a strong growth phase on the back of robust growth in underlying drivers in addition to a strong global demand.

Also, the global steel industry structure is changing in India's favour, with Tata Steel's acquisition of Corus Group and Posco, Arcelor-Mittal's interest in setting up new integrated operations in India should accelerate development of India's steel industry significantly.

The report forecasts that by 2015, the global market will splot more sharply into mass markets on the one hand and high-end markets on the other. The mass markets will expand in developing countries, fed by growing global-trade volumes resulting from capacity increases in commodity segments worldwide.

Meanwhile, the high-end markets, such as the automotive sector, will experience stricter requirements for quality and performance, Mr Nandgaonkar added.

He said for the first time in decades, the global steel industry has outperformed all other basic material sectors, achieving a total shareholder return of 37 per cent over the past five years.

Responding to a questions on how long can the good times last and what will happen when China's steel capacity significantly outstrips its demand to that Mr Nandgaonkar said, China is currently the biggest driver of both demand and supply for steel, but BCG anticipates that China's demand will continue to grow, but at a slower pace.

Driving that growth will be continued expansion of China's industrial production and Gross Domestic Product (GDP), which it expects to quadruple between 2000 and 2020, the report added.

He further said that their findings further pointed out that China plans to add 100 to 120 million tonnes (MT) of net domestic steel capacity by 2010. This amounts to some 25 to 30 MT of additional capacity per year.

Ultimately, the Government plans to concentrate its more than 800 steel makers into roughly 10 large units producing half the national output.

He said quality will remain an issue for China over the next several years. However, the rising investments in automatic technology show its commitment to moving further up the quality pyramid.

BCG estimates that at least by 2012, China's steel exports will most likely continue to be primarily commodity grade long and semi-finished products, while its imports will remain higher quality flat products, he added.

Responding to question Mr Nandgaonkar said the existing restrictions preventing foreign steel makers from becoming majority shareholders in Chinese steel companies will most likely to continue.

He said India's per capital steel consumption has lagged other countries at a similar stage of development due to low investments in social infrastructure, smaller automotive and home appliance industries and a relatively small share of the economy represented by heavy industries which is only 25 per cent compared to 35 per cent in Brazil, 38 per cent in Russia and 53 per cent in China.

The current growth in economy is changing these variables and will create a strong domestic demand.

He said in view of the fact that nearly six per cent global iron ore deposits and 11 per cent of the world coking coal deposits India is placed very comfortably on a higher growth slot over the next decade or more.

UNI