openPR Logo
Press release

Indian steel’s long-term fundamentals are intact: Ernst & Young

02-25-2009 09:05 PM CET | Business, Economy, Finances, Banking & Insurance

Press release from: Ernst & Young India

Indian steel’s long-term fundamentals are intact: Ernst &

New Delhi, 18 February 09: Leading professional services firm Ernst & Young (EY) today released a report titled ”Indian Steel Industry 2009: squeezed, but strong” at the Mining to Steel Summit 2009 organized by Indian Chambers of Commerce (ICC) here. Sounding an optimistic note, the report states that though the world steel scenario is grim, India has the potential to grow at double digit rates and should target a production of 125 mn tonnes in the medium term.

Drawing a parallel with China, it goes on to say that during the 1998-2003 period, when the finished global steel production grew at a compounded annual growth rate (CAGR) of 1.6%, the Chinese finished steel consumption doubled at a CAGR of 18%. The key drivers of Chinese steel demand were massive infrastructure development and high level of urbanization, escalating demand from housing, automobile and white goods sectors, says the report.

Says Navin Vohra, Partner & National Leader – Metals & Mining Practice for Ernst & Young, “the current Indian scenario is very similar to that of China in 1998 and we expect significant investments here towards large-scale public infrastructure, urbanization, auto and white goods. Further, in the long-term, capacity in the commodity industry has to move to low-cost centres and India is well-placed with abundant high-quality iron ore, qualified manpower and competitive capital costs due to low land and construction costs. ”

According to the report, while the near-to-medium term future of the global steel industry is challenging, the outlook for India is also encouraging because unlike the last bear phase during 1993-94 to 2001-02 when the domestic sector was reeling under a supply overhang the supply – demand scenario is more balanced this time.

On the related question of whether the Indian steel industry is prepared for the expected demand growth, the report has suggested certain proactive measures to boost supply additions such as priority sector status for credit availability, clear and unambiguous mine allocation and land acquisition policies.

Steel prices remain under pressure in near-term

According to the report, the near-term outlook for the industry is challenging as the growth in key end-user industries such as construction, automobiles and manufacturing has taken a backseat. The downturn has also led to a decline in the prices for raw materials such as iron ore and coking coal, albeit at a lower rate than the dip in steel prices. Further, prices are expected to decline in 2009 as consumption levels are projected to continue plummeting.

As steel manufacturers have undertaken production cuts, this is likely to result in a surplus of iron ore and resulting weakening of ore prices. It is expected that the domestic steel companies will try to drive hard bargains for iron ore, though the consolidated nature of the raw material industry ensures that generally it is the input suppliers who have better bargaining power than the steel manufacturers, thereby impacting operating margins, says the report.” Similarly, the coking coal market is also expected to turn into a surplus on account of the production cuts in the industry.

Says Navin Vohra, Partner & National Leader – Metals & Mining Practice, Ernst & Young, “the companies with captive mines will be in a better position to combat the downturn. The key strategies which companies can adopt in this scenario is to focus on value-added products, rationalize cost structure through better manpower planning, logistics and raw material sourcing. The companies with a focus on the domestic market are likely to be more favorably placed, given the relatively stronger demand from the local users.”

Raw material security to drive M&A in the long-term

Over the last three years, the Indian steel industry has witnessed 44 merger & acquisition (M&A) transactions aggregating USD 16.8 bn. A majority of these were outbound deals and acquisition of steel processing units. Achieving resource security has been a primary driver behind these deals. Further, geographical expansion, increased market share and an improved cost structure have been governing these transactions.

Given the current liquidity crunch, M&A activities have dried up and are expected to remain low in the short-term as companies are finding it difficult to raise funds from the debt and equity markets. Only cash-rich or well-capitalized companies are expected to follow the inorganic growth route.

The report estimates M&A activity to rebound when the credit crunch eases and the economy picks up as domestic players will require iron ore and coking coal reserves for enhancing their raw material security. Further, there is a relatively high fragmentation in the industry in India and therefore a need to attain economies of scale and improve bargaining power with raw material producers. Increasing geographical spread to enter high-value steel markets is another imperative.


About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

For more information, please visit

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

This news release has been issued by Ernst & Young Private Limited which is one of the Indian client serving member firms of Ernst & Young Global Limited.

Ernst & Young Pvt. Ltd. is a company registered under the Companies Act, 1956 having its registered office at Block C, 3rd Floor, 22 Camac Street, Kolkata – 700016

A summary of the Ernst & Young Steel Report, Indian Steel Industry 2009: squeezed, but strong

Contact Information:
Priti Bhutani
Ernst & Young Pvt. Ltd.
+91-124-4644255, +91 98109 95350

This release was published on openPR.

Permanent link to this press release:

Please set a link in the press area of your homepage to this press release on openPR. openPR disclaims liability for any content contained in this release.

You can edit or delete your press release Indian steel’s long-term fundamentals are intact: Ernst & Young here

News-ID: 68829 • Views:

More Releases from Ernst & Young India

Small towns lead the league for marketers
Mumbai, 11 May, 2010: Ernst and Young today released the report, "The New Market Shehers: Tapping Potential Beyond the Metros" identifying the trends in consumption patterns and marketing spends in small town India. The report provides an insight on how non-metro urban markets are becoming more relevant in India's consumption story and how marketers are restructuring their budgets to take advantage of the new urban consumer. The New Market Shehers:
Indian passenger vehicle market expected to be 3.75 million by 2014, Ernst & You …
NEW DELHI, 29 June: The Indian passenger vehicle market is expected to grow at a compounded annual growth rate of 12% over the next five years, reaching 3.75 million units in 2014 from current sales of 1.89 million units in FY09, reveals a latest analysis by professional services firm Ernst & Young. While exports are expected to contribute with volumes of 1 million units, the balance of 2.75 million
India Inc optimistic about growth; Ernst & Young Survey
• At least 10% growth in businesses expected for FY10 by 46% respondents • Three-fourth respondents report only a low to medium impact of downturn • Cost reduction, hiring freeze, commodity and forex risk management dominate corporate agendas • Term loans from banks, debt/equity from group companies emerge as preferred means of raising capital • Majority expect consolidation, 47% believe assets are undervalued Mumbai/ New Delhi, 5 May, 2009 : – As the recent fourth quarter
Indian wellness services market to grow at 30-35% CAGR, says FICCI-Ernst & Young …
Mumbai, April 15, 2009- Notwithstanding the current economic slowdown which has impacted several sectors, the Indian wellness services market is expected to remain buoyant and has the potential to sustain a compounded annual growth rate (CAGR) of approximately 30-35% for the next five years, says a latest study by FICCI and professional services firm, Ernst & Young. The wellness services market is currently estimated at Rs 11,000 crore. The FICCI-EY

All 4 Releases

More Releases for Indian

STAAH Nominated for the Prestigious Indian Newslink Indian Business Awards 2017
STAAH Nominated for the Prestigious Indian Newslink Indian Business Awards 2017 The award recognises STAAH’s product and process innovation, and its success through international business with India. Winners will be announced at the end of November at a prestigious ceremony in Auckland. “We are honoured to be nominated for this award,” says Gavin Jeddo, Founding Director of STAAH Ltd. “It has been a massive two years of growth for us and India
Indian start-ups take Indian innovations to Africa Twenty- One Indian Start-ups …
11th July2016, Nairobi: The Federation of Indian Chambers of Commerce and Industry (FICCI) jointly with the Technology Development Board, Government of India took a delegation of twenty one Indian innovation led start-ups to Nairobi, Kenya showcased at the business enclave that was addressed the Hon’ble PM Shri Narendra Modi and the President of Kenya on 11 July 2016. FICCI and TDB intend to begin a program dubbed African Development through
Indian Medicine
Dr.JRK's Siddha Research and Pharma is the herbal medicine in India, and has been in the business of good manufacturing practices. We strongly believing in intellectual asset creation through discovery, documentation and development of Indian systems of medicine. G7 capsules is the solution for Allergic Disorders the herbal medicine in Inida. Atopy or hyper sensitivity is the major problem in all countries, the problem manifest in multifold ways such as
Indian Spices
From ancient times, India is known as the 'The home of spices'. The climate of the country is suitable for almost all spices so, India has retained its top place for being the amplest spices exporters and manufacturers in the world. Indian Spices are essential commercial crops from the point of view of both domestic consumption and export. Agrocrops Exim Limited is a certified public limited company dealing in exporting
Best Indian Caterer Birmingham, London, Indian Food Catering in UK, Indian Cater …
Sukhdev Catering Services Ltd has become one of Grand Rapids' premier catering and event services in United Kingdom. We pride ourselves in outstanding level of service and superb menu selections. Sukhdev Catering Services Ltd provides elegant catering services for wedding receptions, corporate events, conferences and other very special occasions. We are provides Indian Caterer Birmingham, London including a various range of foods and drinks coupled with our outstanding service and
Contemporary Indian Art, Indian Paintings
Studiorameshwaram is established in the year 2001 by the famous Indian artist Rameshwar Singh. We are an online art gallery which includes Contemporary Indian Art, Indian Paintings, Modern Paintings, Modern Indian Art, Rajasthani Paintings, Indian Art Gallery, Paintings of India and all are affordable Indian Paintings. This online art gallery is the place for young artists to exhibit their art works. This website is all about Contemporary Indian Art and