Owing to India’s gradual shift from a services-based to an industry-driven economy major manufacturing sectors such as steel are expected to grow at a healthy rate of 7% during 2016-20 to reach 200 Mn MT by 2020, mainly driven by automotive and auto component industries. Due to increased domestic competition and imports for conventional steel grades, all major manufacturers of steel are now focusing on manufacturing niche grades (specialty steel grades) that would fetch them higher profit margins. The demand for engineering quality steel is expected to increase 3 to 4 times of the current value by the end of FY 2026.
Precision manufacturing, profit margins and increasing demand makes engineering quality steel an attractive grade to manufacture. Hence, all the major manufacturers are now focusing on increasing their capabilities to manufacture engineering quality steel grades catering to new end-user segments such as defense, aerospace etc.
Key questions this Industry Docket looks at:
1. What are major growth opportunities for engineering quality steel grades in Indian market for the next five years?
2. What is the supply structure of the engineering quality steel grades in Indian Market?
3. What are the drivers, restraints and challenges that are impacting the engineering quality steel market in India?
4. What are the major steel grades that would drive the demand for engineering quality steel?
5. What are the key success factors for engineering quality steel suppliers in Indian market?
1. Engineering Quality Steel: A snapshot
- The quality steel market is expected to grow at 7.7 % mainly driven by demand in automotive, wire and seamless pipes industries
2. Scope & Limitations
3. Market Outlook: India
- Anti-dumping duties and Make in India policy create opportunities for medium / small manufacturers to bag big orders
- Indian demand for engineering quality steel is currently around 7 Mn MT; was around 6.6 Million MT in 2015-16
- 69% of the total domestic demand is in the form of Wire rods and Rounds…
- Engineering Quality Steel demand comprises mainly Carbon steel grade, Cr-Moly grade and Chrome steel grade
- Engineering Quality Steel manufacturers will have to focus on strengthening their distribution channel mainly in the Northern and Western regions
- Market for Engineering Quality Steel is more organized as compared to other steel grades. Top 6 players capture 45% market
4. Opportunities: Sector-wise
- Healthy Indian automotive sector augurs well for the steel industry with around 45% contribution to demand
- Market potential for PV & CV will be the trump card for potential of engineering quality steel
- Automotive component aftermarket potential is a bonus for demand of engineering quality steel
- Large scale forging companies have higher bargaining power while choosing engineering quality steel suppliers
- Carbon steel with diameter less than 8mm will address the major portion of engineering quality steel wire’s demand
- The demand for steel wires to grow at over 9% by 2020 complemented by industrial growth in developing countries
- Vertically integrated manufacturers pose stiff competition in the market. Secondary manufacturers thrive on customized products
- Indian share in global primary energy consumption is projected to increase two-fold by 2035, driving demand for seamless pipes
- O&G and Power sectors will be the key contributors for market growth of seamless pipes… expected to be 710,000 MT by 2019-20
- Seamless pipe procurement uses the conventional distribution channel: approved vendors supply major projects. High barriers to entry but high volume clients
- Major fastener manufacturers in India have started focusing more on high tensile fasteners as it fetches greater profit margins
- Demand for fasteners in automotive industry along with economic growth and industrialization to drive growth @ ~12% from 2015-20
- Low standardization levels due to different design specs by auto manufacturers increase cost of production for fasteners… but high margins make it lucrative
5. Mega Trends & their Impact
- Indian automotive and auto component manufacturing Industries will be the backbone for future demand of Engineering Quality Steel
- Govt. Initiatives such as Industrialization and Make in India to positively impact the demand growth of engineering quality steel