SRO (INDIA)

India Short Range Outlook (SRO)

For WSA 100th ECON Meet – Brussels, Belgium

NOTE: For the SWIP model, all calculations and assumptions have been made according
to India’s financial year classification.
Fiscal FY(n) start from April (n-1) and end on March (n)
 Short Range Outlook (India)
Contents

1 Economic Growth: Status & Outlook

2 Steel Consuming Sectors: Status & Outlook

3 Steel Demand Projections

Slide 2
 Short Range Outlook (India)
Contents

1 Economic Growth: Status & Outlook

2 Steel Consuming Sectors: Status & Outlook

3 Steel Demand Projections

Slide 3
 Short Range Outlook (India)
Economic Outlook
Indian Economy to grow @+7% levels driven by sustained revival in investments & healthy consumption. Crude oil &
inflation are major risks

GDP Growth Factors shaping the forecast

• India to again become fastest growing G20 economy, driven by
8.5% strong service sector
8.2%
8.0% • Govt. driven infrastructure programs to support industry growth,
7.4% 7.6% while agriculture growth to remain nearly stable
7.5%
7.4% • Successful implementation of reforms to boost growth,
7.0% 7.1% especially in manufacturing sector.
6.7%
6.5%
• Rising capacity utilization to support gradual pickup in private
6.0% investments
5.5%
Risks to forecast
5.0%
• Rising oil prices and stressed government finances
4.5%
• Monetary tightening on account of rising inflation
4.0%
FY15 FY16 FY17 FY18 FY19f FY20f • Weaker employment growth

Sources: RBI (Reserve Bank of India); CMIE (Center for monitoring Indian Economy);
Ministry of Finance Slide 4
 Short Range Outlook (India)
Contents

1 Economic Growth: Status & Outlook

2 Steel Consuming Sectors: Status & Outlook

3 Steel Demand Projections

Slide 5
 Short Range Outlook (India)
Construction Sector
Construction Growth (%); SWIP Weight: 62% Highway Projects awarded by NHAI (KMs)

6.5% 6.0%

3.6% 3.7%
3.0%
1.9%

CY14 CY15 CY16 CY17 CY18f CY19f

Outlook (For Sept’18 SRO)

✓Infrastructure development, especially road to further boost the
growth. Govt is targeting to build 16420 km roads during FY19 Supply of new residential launches (7 big cities)
(~45 Km per day)
✓Under the sagarmala project, about 500 projects are at various
stages of progress. About 15-20% of these projects are under
implementation, which will boost demand in next 2 years
✓During Q1 2018, revival has been witnessed in real estate sector
with increase in new launches, however, liquidity is still a concern

Slide 6
 Short Range Outlook (India)
Capital Goods Sector
Capital Goods Growth (%); SWIP Weight: 15% Earth Moving Industry Tower EPC investment
7.0%
7.0% ‘000 Units Rs. Billion
4.9%
3.8%

80 86 163
63 142 160
0.5% 53 106 120
1.8% 37

CY14 CY15 CY16 CY17 CY18f CY19f 2015 2016 2017 2018f 2019f FY16 FY17 FY18e FY19f FY20f

Outlook (For Sept’18 SRO) Renewable Capacity Additions (GW)

✓Infrastructure push coupled with growth in mining segment to Solar Wind
boost construction equipment segments
✓Planned capacity additions of ~17 GW of wind energy and
~45 GW of solar energy over the next 5 years (2018-22).
10 6.5
✓Double digit growth in power transmission industry to 8 9 5.4
4.5
6 3.4
✓Plans to allocate a defence budget of $620 billion for promote 3 1.5
defence manufacturing. Companies like Airbus and Lockheed
FY16 FY17 FY18e FY19f FY20f FY16 FY17 FY18e FY19f FY20f
evaluating the investment opportunities of $168 billion

Slide 7
 Short Range Outlook (India)
Automotive and Consumer Durables Sector
Automotive Growth (%); SWIP Weight: 9% Outlook (For Sept’18 SRO)
11.3% ✓ PV and 2W segment to register healthy growth with rising
10.0%
9.0% demand from rural and semi urban areas
✓ LCV segment is expected to witness double digit growth
4.6% due to rise in second leg freight demand
2.3% ✓ MHCV segment to be driven by infrastructure
0.2% x However, easing of axle loading norms coupled high base
will impact demand growth towards end of the year.
CY14 CY15 CY16 CY17 CY18f CY19f

Consumer Durables Growth (%); SWIP Weight: 5% Outlook (For Sept’18 SRO)

13.4% 11.9%
8.6% ✓ In Q1 CY18, sector has registered a strong growth driven
by ACs, Washing Machines and furniture segments.
3.6% 6.5%
✓ With revival in rural income and low base, healthy growth in
the sector is likely during CY18
-3.9% x However, competition from imports of finished goods and
SKD (assembled in India) remains a risk.
CY14 CY15 CY16 CY17 CY18f CY19f

Slide 8
 Short Range Outlook (India)
Intermediate Goods & Railways
Intermediate Goods Growth (%); SWIP Weight: 6% Outlook (For Sept’18 SRO)
6.8% 6.5% 6.5%
6.6%
✓Auto components sector is witnessing strong demand from
3.8% domestic manufacturers as well as international markets
✓Tubes and pipes segment to witness a healthy growth driven
by construction sector
Wt: 6%
✓Drums and barrels demand to remain healthy
-1.4%
CY14 CY15 CY16 CY17 CY18f CY19f

Railways Growth (%); SWIP Weight: 3% Outlook (For Sept’18 SRO)

10.6%
7.7% 7.2% 7.1% 7.5%
✓On-going freight corridor and metro rail projects will continue
to support the demand in railway sector
✓In addition, development of last-mile rail connectivity of ports
with the investments of over Rs. 150 Bn are currently in
Wt: 3%
-7.9% various stages.

CY14 CY15 CY16 CY17 CY18f CY19f

Slide 9
 Short Range Outlook (India)
Contents

1 Economic Growth: Status & Outlook

2 Steel Consuming Sectors: Status & Outlook

3 Steel Demand Projections

Slide 10
 Short Range Outlook (India)
Steel Demand Outlook
Steel demand from key consuming sectors (Real Steel Use) is likely to grow by 7.7% in 2018 and 7.3% in 2019, while
growth rate of Apparent Steel Use is likely to stay at 7.6% and 7.5% during the same period
Real Steel Use- RSU (mt, %) Change in stock (mt)
110 100.3 10% 1.5
100 93.5 1.0
86.8 8%
90 81.1 84.0
78.1 7.7% 7.3% 6%
0.5
80
3.8% 3.6% 3.4% 0.0
70 4%
5.0% -0.5
60
2%
50 -1.0
40 0% -1.5
2014 2015 2016 2017 2018 2019 Q1 Q1 Q1 Q1 Q1 Q1

RSU RSU % 2014 2015 2016 2017 2018 2019

Apparent Steel Use- ASU (mt, %) RSU vs. ASU (mt)

120 10% 29.0
102.5
95.4 27.0
100
83.6 88.7 8%
75.9 80.2 25.0
80 7.6% 7.5% 6% 23.0
60 6.0%
5.6% 21.0
4%
40 4.3% 19.0
3.1% 2% ASU RSU
20 17.0
0 0% 15.0
2014 2015 2016 2017 2018 2019 Q1 Q1 Q1 Q1 Q1 Q1

ASU ASU % 2014 2015 2016 2017 2018 2019

Slide 11
 Short Range Outlook (India)
SUMMARY
Apparent Steel Use in India is forecasted to be at 95mt in 2018 and 102.5mt in 2019

Mar’18 submission Sept’18 submission

2017e 2018f 2019f 2017p 2018f 2019f

ASU (MT) 87.25 92.01 97.52 88.68 95.42 102.54

ASU Growth (%) 4.31% 5.46% 5.98% 6.0% 7.6% 7.5%

Change over 0.13 MT -0.11 MT 1.43 MT 3.41 MT

- -
previous forecast (+0.15%) (-0.12%) (+1.64%) (3.71%)

RSU (MT) 85.41 90.21 95.82 86.72 93.51 100.29

RSU Growth (%) 2.70% 5.62% 6.21% 3.4% 7.7% 7.3%

e: estimate; p: provisional; f = forecast

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Short Range Outlook (India)

Thank You

Slide 13