State Wise Steel Demand in India

ISA Steel Conclave, New Delhi, October 26, 2018

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2

Contents

▪ worldsteel’s India state wise steel demand study

▪ Aspects of state wise steel use in India

▪ Insights on state wise steel demand prospects

▪ Summary and conclusion

3

worldsteel’s India state wise steel demand study

Motivation of the study

▪ India is known as a country of potential, but there are different views about when India’s

steel demand will start to take off.

▪ India’s growth prospects can be better understood by looking at India by states as was

the case with worldsteel’s provincial approach to China.

▪ Such disaggregated approach enables identification of uniqueness of each state and

better insight on economic and steel demand potential.

▪ The Project Team looked into characteristics of states (“White book of Indian states”)

focusing on potential for growth of steel using sectors, notably construction and

manufacturing.

5

Project team

▪ The Project was conducted under Joint leadership of worldsteel and ISA since 2016 2H

▪ Key contributors

▪ External partners: Joint Plant Committee

6

Estimating state wise steel demand – worldsteel approach

7

▪ In the absence of steel use statistics by state, SWIP share was used to estimate state wise

steel use

GSDP Construction .

GSDP Construction × ASU, fs India × 0.62 +

VA SWIP .

VA SWIP × ASU, fs India × 0.38

Aspects of state wise steel use in India

White books of India States

▪ Project Team has produced a “white book” for each state which covers the following aspects:

• Macroeconomic performance and drivers.

• Key policy initiatives and business environment.

• Overview of key industries in the state.

• Identification of steel demand drivers and SWOT analysis.

▪ Through this exercise, it was possible to identify and compare growth potential of different

states and the team has produced an evaluation of steel demand growth potential for each

state.

Note. 7 North Eastern states were approached in a consolidated way, the rest of the 22 states were studied separately along with National

Capital Region of Delhi.

9

States show uneven and multispeed development

▪ Regional growth has been uneven among states.

• West Bengal experienced economic decline after 1960s.

• Tamil Nadu on the other hand has grown steadily and consistently.

• Gujarat has been outperforming while northeastern states lag behind.

▪ Rich states are located in western/southern and northern India.

10

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

GujaratChhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

handWest

Bengal

Sikkim

Goa

PunjabArunachal

PradeshAssam

Nagaland

Manipur

MizoramTripura

Meghalaya

Telang

ana

100-140 k INR

< 50 k INR

> 140 k INR

50-100 k INR

GDP per capita, 2015-16

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

Gujarat Chhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

hand

West

Bengal

Sikkim

Goa

PunjabArunachal

PradeshAssamNagaland

Manipur

MizoramTripura

Meghalaya

Telang

ana

6-8 %

< 4 %

> 8 %

4-6 %

GDP growth, CAGR 15-16 / 11-12

Source: Central Statistics Office, worldsteel

Crude steel production by states

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

Gujarat

Chhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

hand

West

Bengal

Sikkim

Delhi

Goa

Punjab

Arunachal

Pradesh

AssamNagaland

Manipur

MizoramTripura

Meghalaya

Telangan

a

0

2

4

6

8

10

12

14

16

18Mt

Crude steel production, India total: 89.8 Mt

Source: JPC, 2015-2016, million tonnes (Mt)

4-10 Mt

< 1 Mt

> 10 Mt

1-4 Mt

▪ Steel production centres: raw materials (iron ore) driven (Odisha, Chhattisgarh, Jharkhand and

Karnataka) or port based and proximity to markets (Maharashtra and Gujarat).

11

Steel use by states

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

Gujarat

Chhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

hand

West

Bengal

SikkimDelhi

Goa

Punjab

Arunachal

Pradesh

AssamNagaland

Manipur

MizoramTripura

Meghalaya

Telangan

a

0,000

2,000

4,000

6,000

8,000

10,000

12,000

14,000Mt

Apparent steel use, India total: 76.4 Mt

Source: worldsteel estimation, 2014-15, million tonnes (Mt)

3-10 Mt

< 1 Mt

> 10 Mt

1-3 Mt

▪ Maharashtra and Tamil Nadu are largest steel using states, both auto hubs.

12

Steel geography of India is unbalanced

▪ Steel producing states in the east have not seen development of own steel markets.

▪ Therefore intra-state trade in steel has been a common feature.

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

GujaratChhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

handWest

Bengal

Sikkim

Goa

Punjab

Arunachal

Pradesh

AssamNagaland

Manipur

MizoramTripura

Meghalaya

Telang

ana

3-8 Mt

< 1Mt

>8 Mt

1-3 Mt

Steel production

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

Gujarat

Chhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

hand

West

Bengal

Sikkim

Goa

PunjabArunachal

Pradesh

AssamNagaland

Manipur

MizoramTripura

Meghalaya

Telanga

na

Source: worldsteel estimation, 2014-15

Steel use

iron ore production (major sites)

Source: Joint Plant Committee, 2015-16

13

Steel use across states is also uneven

▪ Among rich states, only a few states show high steel use per capita, e.g. Tamil Nadu, Maharashtra,

Gujarat, Goa.

▪ North-Eastern states feature low steel use per capita, e.g. Assam, Manipur, Nagaland

▪ Some states have high steel use per capita despite low per capita income, driven by infrastructure, e.g.

Uttarakhand.

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

Gujarat

Chhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

hand

West

Bengal

Sikkim

Goa

Punjab

Arunachal

PradeshAssamNagaland

Manipur

MizoramTripura

Meghalaya

Telang

ana

Source: Central Statistics Office, worldsteel estimation, 2014-15

< 50 kg

> 100 kg

50-100 kg

Apparent steel use per capita

0

50

100

150

200

250

300

0

50

100

150

200

250

Uttara

kh

and

Hary

an

a

Goa

Tam

il N

ad

u

Him

. P

rad

.

Mahara

shtr

a

Ke

rala

Ka

rnata

ka

Guja

rat

Pu

nja

b

Aru

n. P

rad.

Sik

kim

Tela

ng

ana

Raja

sth

an

Miz

ora

m

An

d. P

rad.

Chha

ttis

garh

Mad. P

rad.

Jhark

ha

nd

West B

engal

Uttar

Pra

desh

Manip

ur

Jam

. &

Kash.

Orissa

Tripura

Naga

lan

d

Assa

m

Megha

laya

Bih

ar

k INRkg

ASU per capita, kg

GDP per capita, k INR

India average: 60.3 kg

14

Diverse patterns of steel use of Indian states

▪ Reflecting uneven and diverse economic growth patterns, different states shows

different tracks of S-curve.

0

50

100

150

200

250

300

0 50 100 150 200 250 300

ASU/cap

GDP/cap

Goa

Haryana

Kerala

Maharashtra

Orissa

Uttar Pradesh

Source: worldsteel estimation, 2004-15

S-curve, 2004-05 – 2014-15

15

Insights on state wise steel demand prospects

Insight 1: Uneven growth will continue, but catching-up

is taking place in some states (1/2)

▪ Uneven economic performances of Indian states has

been driven by geography, natural resources and

socio-political environments.

▪ Political leadership and consistent policy had important

influence on the economic performance of the

advanced states (e.g. Gujarat).

▪ Central government’s focus on improving ease of doing

business has prompted pro-business reforms in

various states.

Source: Central Statistics Office, worldsteel

State GDP growthCAGR 15-16 / 11-12 (India average: 6.7 %)

Gujarat 9.5

Himachal Pradesh 7.6

Karnataka 7.5

Chhattisgarh 7.3

Haryana 7.1

Uttarakhand 7.0

Maharashtra 6.6

Madhya Pradesh 6.6

West Bengal 6.4

Andhra Pradesh 6.4

Jharkhand 6.3

North East states 6.1

Odisha 5.9

Tamil Nadu 5.7

Rajasthan 5.6

Sikkim 5.6

Telangana 5.2

Jammu and Kashmir 5.1

Uttar Pradesh 5.0

Punjab 4.7

Kerala 4.6

Bihar 4.5

Goa 1.0

17

Insight 1: Uneven growth will continue, but catching-up is

taking place in some states (2/2)

▪ Strong growth momentum will continue in Gujarat, Haryana,

Maharashtra & Tamil Nadu.

▪ Some middle income states shows high growth potential

driven by renewed focus on economic development (Andhra

Pradesh, Telangana).

▪ Eastern states (Chhattisgarh, Jharkhand, Odisha) are

expected to catch up thanks to mining and manufacturing

development.

▪ North eastern states are expected to stay on lower growth

track limited by lack of reform and geography, but large

infrastructure investment as announced by the government

can change overall investment environment in the long run.

Potential for growth,

economic development

Source: Project Team Analysis

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

GujaratChhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

hand

West

Bengal

Sikkim

Goa

PunjabArunachal

PradeshAssam

Nagaland

Manipur

MizoramTripura

Meghalaya

Telang

ana

medium high

low

high

Potential for growth:

medium low

18

Insight 2: Service sector will continue to be a growth driver▪ Service sector has been the key growth driver for India, enabling employment generation with less capital

investment.

▪ Service sector will continue to be important due to:

• Stronger focus on generating employment for sustainable and equitable growth,

• Competitive advantage in the knowledge based service sectors

Source: Project Team Analysis

Potential for growth, services (knowledge based)Share of services in GDP

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

Gujarat Chhattis-

garh

UttarakhandHimachal Pradesh

Haryana

Jhark-

hand

West

Bengal

Sikkim

Goa

Punjab Arunachal

PradeshAssam

Nagaland

Manipur

Mizoram

Tripura

Meghalaya

Telang

ana

50-60 %

< 40 %

60-70 %

40-50 %

Source: Central Statistics Office, 2015-16

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

GujaratChhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

handWest

Bengal

Sikkim

Goa

Punjab Arunachal

PradeshAssam

Nagaland

Manipur

MizoramTripura

Meghalaya

Telan

gana

medium high

low

high

Potential for growth:

medium low

19

Insight 3: Manufacturing is slowly gaining momentum (1/2)

▪ The share of manufacturing in India’s GDP stayed within 14-16% in the last 40

years, only recently rising to 18%.

▪ Some states have strong presence of manufacturing due to:

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

Gujarat

Chhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

hand

West

Bengal

Sikkim

Goa

Punjab Arunachal

Pradesh

AssamNagaland

Manipur

MizoramTripura

Meghalaya

Telanga

na

20-40 %

< 10 %

> 40 %

10-20 %

Share of manufacturing in GDP

Source: Central Statistics Office, 2015-16

• Unfavorable climate for agriculture (e.g. Gujarat,

Maharashtra and Tamil Nadu).

• Mineral deposits leading to heavy industries base (e.g.

Goa, Odisha, Chhattisgarh and Jharkhand).

• Special tax benefits (e.g. Uttarakhand, Himachal Pradesh

and Sikkim).

▪ “Make in India” provides vision for enhancing manufacturing

activities across states, aiming to raise share of manufacturing

to 25% of GDP.

20

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

Gujarat Chhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

handWest

Bengal

Sikkim

Goa

Punjab Arunachal

Pradesh

AssamNagaland

Manipur

Mizoram

Tripura

Meghalaya

Telanga

na

medium high

low

high

Potential for growth:

medium low

Potential for growth, manufacturing

(steel intensive)

Source: Project Team Analysis

▪ Some states will have stronger focus on manufacturing:

• Maharashtra, Uttarakhand, Tamil Nadu, Gujarat, and

Haryana have made significant progress in implementing

business reforms and suitable infrastructure.

• States like Andhra Pradesh, Madhya Pradesh and

Punjab have renewed thrust on manufacturing, especially

in auto and ancillary sector.

▪ Within the manufacturing sector the focus is more on

relatively labour intensive ones like food processing and

textiles.

▪ Mechanical machinery and shipbuilding sectors are less

prominent across states with a few exceptions (e.g. Punjab

and Gujarat).

Insight 3: Manufacturing is slowly gaining momentum (2/2)

21

Insight 4: India’s auto manufacturing hub will expand

▪ India’s auto industry has shown a strong growth driven

by domestic demand and FDI inductive policies.

▪ India aims to be a global auto hub for small cars with

huge focus on exports.

▪ The existing automotive hubs in Haryana, Tamil Nadu,

Maharashtra will continue to strengthen.

• Haryana is the largest production hub and geared to

domestic market.

▪ New auto hubs are emerging in Andhra Pradesh, Gujarat

mainly driven by FDI.

▪ The sector is also poised for continued strong growth.

Automotive industry in India

Source: SIAM, IBEF, public domain

22

Insight 5: Construction will be a common demand driver▪ Growth in the construction sector will be a pan-India phenomenon driven both by infrastructure spending

and housing demand, especially affordable housing.

▪ Construction has gained significant share in Tamil Nadu, Uttar Pradesh, Chhattisgarh, etc.

▪ Majority of states are expected to have strong infrastructure development, especially along major corridors.

▪ In some states, like Jammu & Kashmir and Bihar, steel demand will be driven almost entirely by

infrastructure development.

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

Gujarat

Chhattis-

garh

UttarakhandHimachal Pradesh

Haryana

Jhark-

hand

West

Bengal

Sikkim

Goa

Punjab Arunachal

Pradesh

AssamNagaland

ManipurMizoram

Tripura

Meghalaya

Telan

gana

8-10 %

< 6 %

> 10 %

6-8 %

Source: Central Statistics Office

Share of construction in GDP

Source: Project Team Analysis

Potential for growth, infrastructure

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

Gujarat Chhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

hand

West

Bengal

Sikkim

Goa

Punjab Arunachal

Pradesh

AssamNagalandManipur

MizoramTripura

Meghalaya

Telan

gana

medium high

low

high

Potential for growth:

medium low

23

▪ Gujarat, Maharashtra and Haryana are likely to experience strongest growth in steel demand. Tamil

Nadu also has good potential.

▪ The unbalanced steel geography will continue: capacity expansion have been mostly brownfield and

new steel production facilities most likely to be built around raw materials.

▪ With decreased transportation cost, intra-state trade steel trade will continue to prevail.

Insight 6: Steel geography of India will remain unbalanced

Source: Project Team Analysis

Potential for steel demand growth

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

GujaratChhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

handWest

Bengal

Sikkim

Goa

PunjabArunachal

PradeshAssam

Nagaland

Manipur

MizoramTripura

Meghalaya

Telang

ana

medium high

low

high

Potential for growth:

medium low

Uttar

Pradesh

Jammu &

Kashmir

Tamil

Nadu

Andhra

Pradesh

Kerala

Maharashtra

Madhya

Pradesh

Bihar

Odisha

Karnataka

Rajasthan

GujaratChhattis-

garh

Uttarakhand

Himachal Pradesh

Haryana

Jhark-

handWest

Bengal

Sikkim

Goa

PunjabArunachal

Pradesh

AssamNagaland

Manipur

MizoramTripura

Meghalaya

Telang

ana

Increase of >1 Mt

Increase in annual crude steel production(from 2010/11 to 2015/16)

Source: JPC

24

Summary and conclusion

Summary of state potential

Ste

el d

em

an

d p

ote

nti

al

Economic growth potential

L

H

L

ML H

Gujarat, Haryana,

Maharashtra

Andhra Pradesh,

Chhattisgarh,

Jharkhand,

Karnataka, Odisha,

Telangana,

Uttar Pradesh,

Uttarakhand

Tamil Nadu

North East ex

Assam

Bihar, Jammu and

Kashmir, Kerala,

Madhya Pradesh,

Punjab, Rajasthan

Assam, Goa,

Himachal Pradesh,

West Bengal

Sikkim

MH

MH

ML

26

Geography of economic vs steel demand potential

Source: Project Team Analysis

▪ Eastern states are expected to catch up in economic development.

▪ Infrastructure will be a pan-India steel demand driver, driven by various government initiatives.

▪ Strong manufacturing potential are shown in a limited number of states.

▪ Gujarat, Maharashtra, Haryana show strongest, balanced potential.

medium high

low

high

Potential for growth:

medium low

Potential for economic growth Potential for steel demand

growth, infrastructure drivenPotential for steel demand

growth, manufacturing driven

27

When will India’s demand take off?

Source: IHS Markit, worldsteel, Project Team Analysis

0

50

100

150

200

250

300

350

0 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000

Ste

el d

em

an

d p

er

cap

ita, kg

/ p

ers

on

GDP per capita, USD/ person

China

India

2008

2005

19932000

19902018

2000

2014

Inflection imminent

Inflection later

Status quo continued

India 2018 to 2030

Thank you for your attention.

29

For further information contact:

Dr Nae Hee Han | Director, Economic Studies and Statistics

World Steel Associationhan@worldsteel.org | T: +32 (0)2 702 8913 | worldsteel.org

worldsteel.org