India's growth slowdown is now well underway, but our latest India Metals Report anticipates limited domestic demand will have little effect on output growth over the medium-term, which is being spurred on by capacity expansion. The sectors which are most exposed to the construction industry are worst affected, while those that are dependent on consumer goods and the automotive industries are likely to fare better. In the near term, it is not clear that weakness in investment will spread to consumption.
However, over the medium-term, the main downside risks will come from delays to projects caused by regulatory hurdles, increased costs associated with inflation and problems with raw material supply. According to the latest data from the World Steel Association (WSA), Indian finished steel consumption rose 11.3% to 64.45mn tonnes, nearly 2mn tonnes lower than we had estimated. As such we have revised down 2015 consumption from 113.5mn tonnes to just over 100mn tonnes. With monthly output levels expected to average around 6mn tonnes in Q411, we forecast crude steel output of 72mn tonnes, a downward revision from the 78.5mn tonnes we forecast in the previous quarter. By 2015 we expect capacity growth – coupled with domestic demand – to lead to crude steel output of just over 104mn tonnes, an increase of 44% over the period. This is a downward revision from the 113.5mn tonnes forecast in the previous quarter due to the anticipation of further delays to steelmaking plants and upstream mining projects as well as lower levels of demand growth.
Lower levels of domestic consumption than previously forecast should ensure that India maintains a trade surplus in aluminium over the medium term and does not descend into deficit, as we had predicted previously. Producers are predicting that India will become a significant exporter to the global market, but delays to new projects pose a downside risk to this scenario. Demand for aluminium in India is projected to grow strongly at an average rate of 12% between 2010 and 2015.
We anticipate a rebound in copper refinery output in 2011, largely correcting the downturn in 2010, with growth of 15% to 744,600 tonnes. A positive long-term outlook means that Indian copper prices are likely to remain well supported and that the decline likely to be witnessed in Q411 and going into 2012 will be temporary. Indeed, the sustained growth of the Indian market will help support international copper prices. The expansion of Sterlite's capacity should push output beyond 1mn tonnes by 2015. This should make India a significant exporter of refined copper, with exports rising to over 300,000 tonnes in 2014 and 2015.
Zinc production growth is set to strengthen in 2011 once industry leader Hindustan Zinc Ltd (HZL) brings its Rajpura Dariba smelter up to full capacity. India will remain balanced between supply and demand with modest net exports over the next five years. Beyond 2011, the medium-term outlook for consumption is broadly positive. Increased use of galvanised steel amid growth in the construction sector will drive the Indian zinc market. India's total production of coated steel, which includes zinc-covered galvanised steel, is expected to rise to more than 6mn tonnes in 2013 from 4.7mn tonnes in 2010; the country's current coated steel (CCS) production capacity stands at 6.2mn tonnes per annum (tpa). HZL dominates growth in the lead industry with its 100,000tpa lead refinery at Dariba due to be commissioned in Q411, although recyclers will retain a significant share of production. By 2012, Indian lead smelting will have reached the limit of capacity, forcing the market to depend more on imports which should reach 91,000 tonnes by 2015.
豫公网安备41010502003434号