The country’s steel
production is estimated to be in excess of 100 million tonnes (mt) in 2019-20. Almost the whole of this crude steel
output is anticipated to be consumed in the country.
Steel pipes have eight per cent share in the domestic steel consumption. Estimated at Rs 50,000 crore by value, the steel pipe
industry is split equally between ERW and S&S segments. In volume terms, the domestic market is split between ERW and S&S in the ratio of 70:30.
In the ERW segment, the utilisation level is expected to be 63 per cent for fiscal 2019, compared with 59 per cent in fiscal 2018. We believe the next cycle of capex will start only when the existing capacities reach utilisation levels of 80-90 per cent, which may take two more years.
For S&S, there is scope of capital expenditure (Capex) of Rs 600-800 crore in fiscal 2020 for balancing requirements and in value-added segments. Despite the capex, utilisation levels are expected to increase to around 50 per cent in fiscal 2020, compared with 46 per cent in fiscal 2019.
Domestic demand for steel pipes has logged a steady 4.5 per cent compound annual growth rate (CAGR) in the past five years. In the next five years, this is expected to improve to seven to eight per cent (higher for ERW vis-à-vis S&S), driven by investment in water supply and sanitation projects, irrigation, CGD projects and increased usage of structural pipes in infrastructure projects, the report by Crisil noted.