India

India’s government is incentivizing the use of steel by providing construction grants for regions that need revitalization. This government money is fueling growth and increasing steel consumption in regions across the country. Some predict that India will increase its rank and surpass China as the top consumer of steel in 2018. This is because India has not yet achieved the level of development China has. In China, the economy is shifting. For years, much of China’s economy was made up of companies in the manufacturing industry, but with a growing upper and middle class, many of China’s industries are going from factories to office spaces. Services are expected to increase in China and lead to a decrease in the need for supplies like steel.

Indian steel consumption is rising thanks to new development projects. (Source: Quora)

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ASEAN (Association of Southeast Asian Nations)

Vietnam and the Philippines have been named two countries to watch in the ASEAN region. Unlike China and Japan, which have relatively more established economies, Vietnam and the Philippines are still in the development phase. Their rapid development is due in part to the growth of e-commerce. As the Vietnamese and Filipino governments race to build stronger countries, they’ll need steel to make improvements in the country’s infrastructure. Many of the cities in the region are outdated and in need of a total remodel. From creating a solid infrastructure to building offices and housing, steel will be in high demand in Vietnam and the Philippines in 2018.

Many ASEAN cities like Ho Chi Minh City pictured above is ripe for growth and development. (Source: Visa2Vietnam)

CIS (Commonwealth of Independent States)

CIS, also known as the Russian Commonwealth, is a confederation of 11 states made up of Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. While Russia is the biggest and most powerful member state, the developing states are eager to catch up. CIS countries will undergo development projects including major infrastructure construction. Such state-level projects will require large amounts of steel and CIS countries will have to vamp up its own production as well as meet its needs through imports. As CIS countries develop, their citizens quality of life will likely increase, and they are expected to consume more goods such as cars and appliances made of steel as well.  

CIS member states are ripe for development and steel consumption in 2018. (Source: The Kremlin)

Japan

In the summer of 2020, Japan is set to host the biggest global summer games event. The government is investing significantly in this effort to build new sports facilities and other structures to accommodate the global event. A new stadium itself is said to have a budget of over USD 2 billion, and most of the construction will require steel. Japan already has some of the best infrastructure in the world. But it will need to adapt in order to accommodate the large number of visitors Tokyo will host over the three-week event.

Japan will need to build many sports venues such as its new stadium pictured above for 2020. (Source: CNN)

The United States

In the United States, the steel market is consumer-driven, and steel is a USD 113 billion industry. The U.S. is already the largest importer of steel by a wide margin. But the U.S. demand for steel is expected to increase. Steel is used for construction, infrastructure, energy, production, packaging, appliances and manufacturing. Many cities in the U.S. are expanding and improving their infrastructure. Cities like New York and San Francisco have aging buildings and transportation systems that need to be revitalized. Steel construction is also a way of creating more energy efficiency. As U.S. cities move to become more conservative with their natural resources, steel is one of the ways to reduce energy use. Things like steel reinforcements, steel roofs and other upgrades make buildings more efficient. Many household appliances and automobiles are also made of steel. As U.S. consumers purchase household appliances, cars and buildings, the U.S. demand for steel will continue to grow in 2018.

While 2018 will not likely see 2017 rates of growth, the steel industry will continue to grow as demand for steel-based goods increases. As developing countries become more dependent on modernized infrastructure, housing and conveniences, the steel industry will continue to show growth for the foreseeable future. Even in China, where manufacturing is beginning to slow down, there is a great demand for steel. In developing smart cities, for example, steel and technology work together to create more efficient cities for all citizens. Steel infrastructure will play a major role in the improvement of cities across the globe for years to come.

The 2008 Financial Crisis was a blow to the global automotive industry and its suppliers. It took years to recover, but the economy did start showing signs of growth. McKinsey&Company’s 2013 report, The road to 2020 and beyond: What’s driving the global automotive industry, painted a positive picture of the global automotive market with profits projected to reach EUR 79 billion by 2020, up from EUR 54 billion in 2012, with China responsible for 60 percent of profits.

Their 2016 report, Automotive revolution – perspective towards 2030, offered a similar outlook. Overall global car sales will continue to grow, but at about a 2 percent growth rate, down 1.6 percent from the last five years. New market trends such as electric/autonomous vehicles, shared mobility and stricter environmental regulations will disrupt the market with new challenges and opportunities, but what remains constant is that the majority of growth in global automotive sales will be lead by the rising middle class of emerging markets, namely in India and China.

Thousands of vehicles are scrapped in the Chinese government’s efforts to reduce emissions. (Source: The Daily Mail)

Subsequently, China reached record vehicle sales in 2016. However, in April 2017, it recorded the lowest number of sales in the past two years for passenger cars, down 3.7 percent from 2015. This follows a national sales tax rise early in 2017 to 7.5 percent, coupled with a general decrease in demand for cars as consumption is reaching a plateau. Moreover, China’s sales tax will increase again to 10 percent in 2018.

India’s Booming Automotive Industry

Unlike China, India’s automotive market shows little signs of slowing down. India is now the world’s fastest growing economy as their GDP is projected to increase by 7.2 percent from 2017 to 2018. Their middle class is estimated to triple by 2025, reaching 89 million households.

The government of India is looking to the automotive industry to lead India’s economic growth, as outlined in its Automotive Mission Plan for 2016-2026 and “Make in India” initiative. Under such plans, the government will work towards creating an additional 65 million jobs in the automotive market and a 500 percent increase in vehicle exports by 2026.

A full parking lot of Renault cars reflects the massive automotive market in India. (Source: The New York Times)

It’s no surprise that Foreign Direct Investment (FDI) is pouring in. From 2000 to 2016, India’s automotive industry alone attracted USD 15.79 billion in FDI. For investors, India’s growing middle class of consumers is as attractive as their vast and low-cost labor.

POSCO Maharashtra in India

POSCO Maharashtra is one automotive supplier that is echoing the growth of the Indian automotive market. Their 2Q17 unaudited earnings report showed significant growth from just a year before in 2016. The reported revenue was USD 331.7 million, compared to USD 174.7 million in 2016. The company’s operating profit was USD 32.6 million, up from USD 3.5 million in 2016. Finally, their net profit was USD 22.9 million, another significant increase from USD 15.9 million in 2016.

*Earnings figures were converted from Korean won to U.S. dollars using August 22, 2017, exchange rates.

The POSCO Maharashtra Plant in India

In May of this year, POSCO Maharashtra signed a MoU with Essar Steel to supply 1.1 million tons of flat steel products during the 2017 fiscal year. This is the second year of partnership between the two companies, but the volume of steel POSCO Maharashtra will supply is 30 percent higher than in 2016.

The growing business reflects the work philosophy of POSCO Maharashtra employees: “If [we] supply quality material, they’ll come back again and again. So that’s what we’re doing right now. Although our products might be priced a bit higher in the Indian market, we are supplying quality material and our customers continue to be loyal because they understand that value.”- Chetan Waghchoure, sales representative for POSCO Maharashtra. Read the full interview here.

POSCO Maharashtra’s Chetan Waghchoure during an interview with The Steel Wire

POSCO Maharashtra is taking full advantage of the thriving automotive industry in India and continues to expand its business by reducing production and inventory costs, increasing performance and efficiency and planning to incorporate AI technology into their future production processes.

Market indicators point to India to drive the profitability of the automotive industry. India’s growing consumption of vehicles, open business environment and vast labor force will continue to attract foreign investment and new businesses. The best part is that India is not even close to being fully developed, meaning brighter prospects for future growth and good news for manufacturers and suppliers.