India the next big thing in steel production

India the next big thing in steel production. INDIA is fast emerging as a powerhouse in the global steel market, with the emerging economy the focus of industry leaders keen not to miss an opportunity for growth, after China's rapid rise caught the majority of the world by surprise. The unprecedented growth in India has attracted many global steel players, with a number establishing large greenfield projects and others entering strategic partnerships or joint ventures with Indian steelmakers, according to an Ernst & Young report, Global Steel 2010 Trends, 2011 Outlook, released today. "What we are starting to see is the early stages of a fairly significant increase in the Indian steel production capacity, which represents the next significant growth market for global steel supply," Ernst & Young's global mining & metals leader, Mike Elliott, said. "Anybody who is anybody in steel at the moment has some form of Indian strategy they are looking to play. "There is a belief there may be some better access they can get to the Indian markets (compared to China) but a number of the early movers have been frustrated by the slowness of being able to execute their plans." The major global players, Posco and ArcelorMittal, are already looking at greenfield facilities in India, positioning themselves ahead of a boom in the local sector, which is being held up as the next "China story". Mr Elliott said when comparing where India was with where China was, they were relatively consistent before China took off. "China went through this massive industrialisation process over the past decade and increased their intensity and greatly increased their amount of steelmaking capacity in the country, so they now have the majority of steelmaking capacity in China," he said. "India is starting to exhibit some of those signs of an increase in the demand side of things, where they are significantly in need of greater amounts of steel and therefore increasing their production capacity in the country and they are also benefiting from large amounts of iron ore reserves in the country as well." Ernst & Young's report found that with India's booming economy driving a 12 per cent rise in domestic steel demand in the next two years, the country is poised to become a dominant player in the global steel sector. Although capacity has increased by 8.7 per cent between 2005 and last year, this was outstripped by growth in domestic consumption of 11.1 per cent over the same period, the report said. Mr Elliott warned that the increased global steelmaking capacity from the investment boom in India would combine with higher raw material costs to squeeze the margins of steelmakers around the world. "The next few years will be survival of the fittest for steel producers," he said. "If there are incentives to install greater, more efficient capacity in places like India, then there is going to be even less opportunity for some of that older installed capacity that exists in the world at the moment. "The higher-cost producers will be the ones who won't be able to operate in an environment where more efficient production is coming in that is lowering the relative production costs." With India starting to exhibit signs of an increase in the demand side of things, where they are significantly in need of greater amounts of steel, the country is also looking to secure more raw materials -- iron ore and coal -- with Australia's resources a main target.