Steel and Aluminium Consumption Drive Metal Transportation Markets in India

The metal transportation market in India is primarily driven by the manufacturing and infrastructure sectors. With both these witnessing impressive growth in the past few years, the consumption of metals, and thereby, revenues for the transportation of metals, have risen steadily. The prospects for the market will get brighter over the next five years, buoyed by several government initiatives in the infrastructure sector, and an expected early revival in the manufacturing sector.

New analysis from Frost & Sullivan, Strategic Analysis of Metal Transportation Market in India, finds that transportable metal production volume in India stood at about 50 million tons in 2008, and expects this to reach nearly 79 million tons in 2014.

"Government policies supporting growth of infrastructure sector through schemes and packages are likely to drive growth of metal industry," says Frost & Sullivan Research Analyst Aneet Bansal. "In December 2008, as part of a multi-billion-dollar package for the infrastructure sector, the government declared a 4 percent reduction in central excise duty on steel products, a step that is likely to have a significant effect on the industry."

Moreover, the availability of huge reserves of raw materials, such as iron ore and bauxite, and skilled labor at low-wage rates puts the Indian metal industry in a better competitive position on the global market, opening up new markets and eventually driving the metal transportation market.

However, the dependence on imports of key ingredients used in metals manufacturing will restrain the growth of the metal industry and its transportation. The lack of domestic availability of key ingredients, such as coking coal, needed for the manufacturing of steel and aluminium, forces the industry to depend on imports, which often neutralizes the advantage of high indigenous reserves of ore.

"The Government has announced initiatives to promote R&D in iron and steel sector to help develop better products, improve the manufacturing process, and attain self sufficiency," notes Bansal. "The recent 'Scheme for promotion of R&D in the Iron and Steel Sector' and the approval of the Steel Technology Centre at IIT, Kharagpur, are definitely positive developments with regard to the industry's prospects in the next few years."

Already, the Centre for Monitoring Indian Economy (CMIE) reports that most metal companies will show improvement in key profitability beyond Q3 2009 and aluminium production too will grow by 10.7 percent in FY10, based on the demand from the electrical power equipment and construction sectors. This bodes well for the evolution of the metal transportation industry.

In most cases, road transport is used in conjunction with railways to transport metals. While road transportation provides important end-to-end connectivity for moving crude and finished metals, rail offers advantages in terms of speed, cost, and safety of transportation. Currently, about two-thirds of the metal transportation in India is by road, but this is expected to decline as the planned 'Dedicated Freight Corridors' of railways become operational.

Most metal manufacturers do not own their fleet and depend on commercial vehicles for transportation. This sector is highly unorganized at present and has a very low penetration of tracking systems. With significant participants such as TATA Steel asking for tracking solutions for its freight, the rest of the market is likely to follow. As the economy stabilizes, increasing investments will boost quality consciousness and help the metal transportation sector become more organized.

Strategic Analysis of Metal Transportation Market in India is part of the Automotive & Transportation Growth Partnership Services program, which also includes research in the following markets: Strategic Assessment of Containerization Trends in India, Strategic Analysis of Cement Transportation Market in India, and Strategic Analysis of Liquid and Gaseous Cargo Transportation Market in India. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

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