Ho Chi Minh City: Strong economic growth could boost steel demand in Asia by 9% annually in the coming years, an executive with Tata Steel said on Monday.
“After all the problems with recession, Asia has come back very strong,” and economies in the region were expanding at between 4-6%, Hemant Nerurkar, managing director of the world’s No. 8 steelmaker, told Reuters in an interview.
Based on an average gross domestic product growth of 6%percent in the region and a steel consumption rate estimated at 1.3 times GDP growth in developing countries, “you can expect a 9% increase for steel consumption,” Nerurkar said on the sidelines of a World Economic Forum meeting.
“I have high hopes of Southeast Asia’s consumption of steel,” he said.
But the region lacked investment and also faced a shortage of scrap metal used for steel production, he said.
Taking an example of Indonesia, where steel per capital consumption stood at 30-40 kg, Nerurkar said it would be a major jump for the country to reach a world level of 250-300 kg.
Asked about progress on a $5 billion investment in a major steel project in Vietnam, Nerurkar said Tata had not secured an investment licence and work on site clearance for the complex has not been completed.
“Steel is a long-term business. It’s not something that you do in one year,” he said, adding that Tata Steel was working with the authorities and expected to obtain an investment licence “at the soonest time”.
The project in the central province of Ha Tinh is designed to use 100% of Vietnamese iron ore, which would help the country narrow its trade deficit by using local material, a Tata Steel official said.
Nerurkar said he expected steel consumption in Vietnam, which has projected its economy to expand to 6.5-7.0% this year from 5.32% growth in 2009, would grow 6% per year.
Vietnam produced 4.56 million tonnes of steel rods in 2009, up 19.1% from the previous year, and its steel imports jumped 13.8% to 9.63 million tonnes, government figures showed.
Asked to confirm news reports the group was in talks with Thailand’s Sahaviriya Steel Industries to sell the Teesside plant in England, Nerurkar declined to give details, but said: “SSI has interest.”
Last month steelmaker Corus, owned by Tata Steel, said it had hired Citi to sell its plant in northern England.