Indian steel pipe makers are expected to benefit from a healthy demand outlook, resilient margins and moderate capex intensity over the medium term. The domestic steel pipes and tubes market in volume terms is split 70:30 between the two segments – Electric Resistant Welded (ERW) and Submerged Acr Welded and Seamless (S&S).
Demand drivers for ERW pipes include higher investments in water supply and sanitation, irrigation, and increased usage of structural pipes in housing and infrastructure projects and other government projects such as the PMAY and the Bharatmala Pariyojana. For S&S pipes, on the other hand, the main growth driver are the government projects in the oil and gas sector.
SteelMint conducted a Webinar on 25th September 2020 to understand the growth prospects of the Indian Steel Pipes and Tubes Industry. The panelists of the webinar were:
Mr. Ujjal Chakraborti, Executive-In-Charge, Tubes Business Unit, Tata Steel, India
Mr. Godfrey John, Director & Business Unit Head India, APAC & EMENA, Welspun Corp Limited, India
Mr. Anubhav Gupta, Chief Strategy Officer, APL Apollo Group, India
Mr. Sudhir Goyal, Managing Director, Madhav KRG Limited, India
Mr. Yogesh Kumar Bhatia, Head-Tube Mills at PP Rolling Mills Mfg Co Pvt Ltd
Mr. Renil Antony, Senior Manager, Metal One Corporation, India
Key takeaways of the webinar are as follows:
The market size of pipes and tubes is around 8-10% of total steel consumption in India with a per capita tubes consumption of 10kgs in FY20 – Per capita tube consumption in India is less than 10kgs, China is 55-60kgs and Global consumption is 21-22kgs.
Pradhan Mantri Awas Yojna to boost consumption of steel pipes and tubes – The Govt. of India is targeting construction of 1 crore houses by March 2022 and has provisioned to provide financial assistance to the homeless and those residing in decrepit houses to assist them in the construction of pucca houses in rural India.
There has been a shift in demand from urban to rural market due to reverse migration – There’s a strong, huge uptake in the rural economy which outperformed the urban economy for good 6-9 months because of rural migration. It is expected that rural markets would drive sales volumes over the next few months as more than 150 million working class population shifted to Tier 2, Tier 3 towns and villages during the lockdown. However, the situation is still very fluid and uncertain on whether they will return to cities or choose to stay back.
Structural Steel Tube is revolutionizing the construction industry – Government plans to start 100 additional airports by 2024 by investing INR 19,000 cr. over the next three years. There is also an increase in demand for better quality, affordable residential projects and warehouses among quality-conscious customers.
New pipe manufacturing capacities of 1.2 – 1.3 million tonnes are being added every year – Low productive mills are being replaced by high production mills. Recently, tube mills have been commissioned in Chhattisgarh and new projects are under negotiations due to travel restrictions amidst the pandemic. Tata Tubes has expansion plans of 140 million metric tonnes per annum in the next 4-5 years in refineries. It has planned investment of INR 3.6 lakh cr. by 2024 in water pipeline projects.
In Oil & Gas sector, there is a thrust to increase the City Gas Distribution (CGD) networks thereby improving the pipeline infrastructure –India is all set to emerge as one of the primary drivers of growth in natural gas owing to a combination of Government’s pursuance of consistent policies and initiatives, as well as fast-developing pipeline infrastructure. In Q1 many of the already approved Water Infrastructure Pipeline Projects/Tenders by PSU’S were postponed owing to funding constraints especially in states like M.P., U.P., and Rajasthan. The Minister of Petroleum and Natural Gas announced INR 73,000 cr. investment in this sector.
GAIL is processing line pipe tenders of more than Rs 1000 crore for around 1 Lakh tonne steel pipe procurement in 2020 – The supply of 800 km line pipe from domestic bidders is expected to be doubled by the end of the current financial year to boost Make in India initiatives and further the goal of a self-reliant India.
Revival of pipeline projects on projected recovery of oil prices in CY21 – After seeing a lull period of limited demand in the last few months on Covid19 led disruptions, panellists expressed optimism with regards to early demand recovery in pipes and tubes industry by Jan/Feb, 2021 as oil prices are expected to bounce back by early next year, thereby kick-starting the pipeline projects.
Outlook of Imports in the Indian Market – As per the government norms Indian API grade pipe manufacturers are buying raw material form the domestic producers however there is still a healthy volume of imports from Japan, South Korea and China.
The adoption of the latest Direct Forming Technology (DFT) – The industry has a positive outlook towards the DFT technology as its cost-efficient and minimizes wastage. Globally, DFT is the latest technology and is preferred in advanced economies such as the US, Europe, South Korea and Japan. Bringing in revolutionary changes in galvanized steel pipes production, APL Apollo Tubes has invested close to INR 300 crore for DFT.
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