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Research report on Indian Pipe Industry 2009 2009-3-2 9:32

Publisher:

Published:

Feb. 2009

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PDF

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US$500.00 Single User PDF

Key Words:

Indian Pipe Industry

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Introduction

The Indian Pipe Industry is among the top three manufacturing hubs after Japan and Europe. However, the penetration level of pipelines in oil & gas transportation is low at 32% in India as compared to 59% in USA and 79% globally. The pipeline network of India for oil & gas transport stood at 13,517 kms in April 2006. Sanitation levels are also lower at 33% in India compared to 91% in Sri Lanka and 100% in France. Of 140 mn hectares of cultivable land in India, only 40% of the land is irrigated. The low penetration levels represent the huge scope for growth for the pipe industry.

The industry is highly Raw Material (RM) intensive with the RM cost accounting for more than 70% of the total cost for steel and PVC pipe companies. These companies depend heavily on imports and hence many steel companies have integrated backward to reduce dependency on imports and price volatility. Freight cost is another key cost component due to higher imports and exports. With the fall in commodity prices and Baltic Dry Index (a barometer for shipping freight rates), pipe companies will be benefited in the coming quarters.

Indian companies produce a wide range of steel, cement and PVC pipes which are used in various critical and non-critical applications. Indian steel pipe manufacturing companies have won several certifications and accreditations from major oil & gas companies across the globe in the recent past. With the low-cost quality products and various certifications, Indian companies have augmented their export sales over the last three to four years.

We expect the positive trend in the Indian pipe industry to continue in the next 3-5 years on the back of high oil and gas discoveries worldwide, increased efforts by the Government of India (GoI) on infrastructure development for laying pipelines for oil & gas transport, replacement demand from US and European countries, water & sewage transport
and irrigation facilities.

Demand triggers for the growth are:
*The GoI increased the annual budget allocation under the Rajiv Gandhi Drinking Water Mission from Rs.65 bn to Rs.73 bn in the Union Budget 2008-09.
*For the XIth Five Year Plan, the GoI is aiming to add 11 mn hectares of irrigational facilities, entailing an investment of Rs.1,580 bn.
*The GoI in its efforts to reduce crude imports has formulated the New Exploration Licensing Policy for exploration and production of oil & gas. The GoI has awarded 165 blocks till date and the number is set to increase to 245 by 2008.
*Private players like Reliance Industries Limited (RIL), Cairn etc have shown interest in setting up pipe infrastructure for oil & gas transport. National gas grid will also be set up requiring an investment of Rs.210 bn.
*City gas pipe is currently available in 10 cities and the coverage is expected to grow to 100 cities in the next five years, entailing an investment of Rs.250-300 bn.
*In addition to the above, the replacement demand from USA and European countries, having a vast pipeline infrastructure, will be huge.

The growth will mainly be driven by steel pipes especially SAW pipes. The order-book position of many pipe companies are almost twice their FY08 sales. However, the risk to the industry growth could be the slowdown in the US economy, the slowdown in oil & gas capex and reduction/postponement of GoI's spending on infrastructure development.

The report elucidates the facts on the Indian pipe industry, supplemented by the latest available data. Emphasis is laid on the following topics to accomplish the report:

* Industry overview.
* Industry features elaborated with respect to fragmentation, durability, capital intensiveness, accreditations and duty structure.
* Statistical information on all types of pipes-current installed capacities, planned capacities, demand projections from oil & gas segment, city gas pipe projects, replacement market, water & sewage, irrigation and replacement demand.
* Global information on capacities-existing & planned and global demand projection for pipes from oil & gas segment.
* Cost and pricing analysis with emphasis on Raw Material (RM) cost, Freight cost and Power & Fuel cost and comments on the industry margins and the average realisations of key players.
* A brief overview of seven key pipe companies with their latest three years data on financial and operational parameters, their strengths and weaknesses and the outlook of these companies.
* Sales for leading players in Steel, PVC and Cement Pipes for the period 2003-04 to 2007-08 along with the exports data of the industry.
* Outlook and Challenges for the pipe industry.

Report Outline

SECTION I

Executive Summary
1 Introduction
2 Demand-Supply Scenario
2.1 Domestic Installed Capacity of Pipes
2.2 Global Statistics
2.3 Demand Projection
2.4 Domestic Demand-Supply Gap
3 Pricing Information
3.1 Steel Pipes
3.2 PVC Pipes
3.3 Cement Pipes
4 Cost Analysis
4.1 Raw Material (RM) Cost
4.2 Freight and Forwarding Expense
4.3 Power and Fuel (P&F) Cost
5 Analytical Models
6 Outlook and Challenges
7 Company Overview
a) Welspun Gujarat Stahl Rohren Ltd.
b) Man Industries (India) Ltd.
c) Jindal Saw Ltd.
d) Maharashtra Seamless Ltd.
e) Electrosteel Casting.
f) Indian Hume Pipe Ltd.
g) Finolex Industries Ltd.

SECTION II
8 Industry Overview
8.1 Steel Pipes
8.2 Asbestos Cement (AC) pipes
8.3 Polyvinyl Chloride (PVC) Pipes
9 Industry Characteristics
10 Demand Drivers
11 Annexures
i Key companywise pipeline projects
ii Gas Pipelines-Present and Future
iii Crude Pipelines-Present and Future
iv Product Pipelines-Present and Future
v Oil & Gas Data
vi Sales and Exports Data

FIGURE INDEX
Figure 1.1 GDP Growth rate % (Global & Domestic)
Figure 1.2 Indian Rural-Urban Population Divide
Figure 1.3 Dismal Sanitation Levels
Figure 2.1 Total Global HSAW Production
Figure 2.2 Total Global LSAW Production
Figure 2.3 Pipe Penetration Levels
Figure 2.4 Life Structure of Gas Pipeline & Oil Pipeline
Figure 3.1 Metal Trends Index Indicating Sentiment on Prices
Figure 3.2 Expected Trend in Prices for steel Tube/Pipe
Figure 4.1 Domestic Prices-HR Coils
Figure 4.2 Domestic Prices-Billets
Figure 4.3 Domestic Prices-Cement
Figure 4.4 Domestic Prices-PVC
Figure 4.5 International Prices-Ethylene
Figure 4.6 Baltic Dry Index
Figure 4.7 Cost Analysis Chart for FY08
Figure 8.1 Classification of Pipes
Figure 8.2 Pipe Manufacturing Process
Figure 10.1 Pipe Demand Drivers
Figure 10.2 Break-up of Demand Driver for Pipe Industry

TABLE INDEX
Table 2.1 Domestic HSAW and ERW Pipes Capacity Scenario
Table 2.2 Global HSAW Pipe Capacities
Table 2.3 Global LSAW Pipe Capacities
Table 2.4 Global ERW Pipe Capacities
Table 2.5 Major Oil & Gas Pipeline Projects Planned in India
Table 2.6 Global Pipeline Projects-Region-wise
Table 2.7 Order book Position of Pipe Companies (as of Sep 08)
Table 2.8 Oil & Gas Pipeline Mileage in US
Table 2.9 Existing Pipelines in Developed Nation
Table 2.10 Water Supply Projects in India
Table 2.11 Exploratory and Development Drilling Activities in India
Table 2.12 Metreage Drilled
Table 3.1 Average Price Realisations of Steel Pipes
Table 3.2 Average Price Realisations of PVC Pipes
Table 3.3 Average Price Realisations of Cement Pipes
Table 4.1 Raw Material (RM) Expenses as a % Total Cost
Table 4.2 RM Consumption (Value-wise)
Table 4.3 Freight Expenses as a % Total Cost
Table 4.4 Freight Expense (Value-wise)
Table 4.5 Power & Fuel Expenses as a % Total Cost
Table 4.6 Power & Fuel Expense (Value-wise)
Table 8.1 Applications of Various Types of Steel/Iron Pipes
Table 9.1 Certifications & Accreditations by Major Pipe Companies
Table 9.2 Working Capital Cycle (Company-wise)
Table 9.3 RM Price Movement for Key Materials
Table 9.4 RM Consumption FY 08