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From Chairman's Desk
After almost five years, the various economies across the world
are experiencing new levels of confidence and growth. Even economies
of middle-east countries are back again on renewed growth path.
GDP in single currency block of Euro area in the second quarter has
grown by 3.6%, while that in the United States has increased 2.5%
compared to the previous quarter. In China, the second quarter GDP
growth has shown an 11% increment while India has reported nearly 9%
for the period ending June 2006.
What is more important, forecasts indicate that such levels
of growth will be sustained over the next few years and all the
economic indicators like inflation, employment, industrial
production or housing market growth rates are looking robust.
Internationally, steel business has entered a new era. Steel
is today a truly global commodity with the dynamics of the business
not only linked to regional economies but to market behaviors across
the world.
Steel business re-emerged with renewed valuations and has
moved away from the earlier branding of value destroyers to that of
value creators. Along with new value creations, steel industry
world-over is following the path of sustainability not only in terms
of business parameters but also in areas of creating a more
environment friendly and socially responsible world.
Globally, the steel industry has been a highly fragmented industry
with the top five companies controlling only about 20 % of the
market-share. In recent times, however, the merger of the top two
steel firms in the world consolidated the market share of the
world’s largest steel group to over 10%. Other top steel producing
companies are constantly looking at larger market-shares through
consolidation with a view to creating renewed value for the
industry.
In this new era of steel, stand-alone capacities in any
market will not survive in the long term. Global consolidation in
terms of market access and sourcing power is the name of the game in
this new era.
In 2005, world crude steel production at 1.132 billion tonnes
registered a growth of 6%, while apparent consumption of finished
steel products at 1.013 billion tonnes also followed with a healthy
growth of 4% year on year.
It is imperative to understand that the main driver to world steel
growth in 2005 has been China; registering a 25% growth in crude
steel production and a 17% growth in finished steel consumption.
China alone consumed and produced almost a third of total world
steel consumption and production. Without China, world steel
industry showed a 1% negative growth in production and consumption.
While Chinese production growth has slowed to 18% year-on-year in
the first six months of 2006, rest-of-the-world production has
turned around from an annual negative growth in 2005 to a 3% growth
in the first six months of the current year compared to the same
period last year. In Europe, Non-EU Countries’ six-month growth
nearly touched 10%, while EU Nations and North American Countries
posted a healthy growth of 4% and 4.7% respectively.
Today, global steel industry is adding capacities and also reviving
existing dormant steel making capacities to meet the buoyant demand.
International steel companies are focused on securing long term raw
material sources and mitigate logistic risks for short and medium
term periods.
Pramod Mittal
Chairman
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