Report Summary
With the burgeoning economic growth, providing adequate infrastructure facilities to a populous country like India is very important. Pipelines used in transportation of oil, gas and water are crucial in developing a nation's infrastructure. Transportation through pipes is cheaper and faster as compared to traditional modes of transport like road and rail. Pipes also have a long useful life of approx. 25-30 years for Steel pipes, 25 years for PVC pipes and 70-75 years for Cement pipes.
The Indian Pipe Industry is among the top three manufacturing hubs after Japan and Europe. However, the penetration level of pipelines in oil and gas transportation is low at 32% in India as compared to 59% in USA and 79% globally. The pipeline network of India for oil and gas transport stood at 13,517 kms in April 2006. Sanitation levels are also lower at 33% in India compared to 91% in Srilanka and 100% in France. Of 140 mn hectares of cultivable land, only 40% the land is irrigated. The low penetration levels represent the huge opportunity scope for growth for the pipe industry.
The Indian pipe industry is highly fragmented with Herfindahl Index of Concentration for steel pipes excluding seamless being 0.06, seamless pipes 0.08 and pvc pipes 0.179. This leads to competition and pricing pressures among the players. However, pipe companies catering to oil and gas sector and government orders have limited competition but need to focus on stringent quality norms.
The industry is highly raw material intensive with RM cost accounting for more than 70% of total cost for steel and pvc pipe companies. High imports, RM availability issues and rising cost are concerns for the industry. However, larger players operating in the organized sector have been able to pass on price hikes to their customers due to better quality specialized products catering to customer needs for critical applications.
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 and gas companies across the globe in 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 and exports from India stood at approximately USD 1.05 bn in 2006.
Our Research expects 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 GoI on infrastructure development for laying pipelines for oil and gas transport, water and sewage transport and irrigation facilities.
Demand triggers for the growth are:
GoI increased the annual budget allocation under the Rajiv Gandhi Drinking Water Mission from Rs. 46 bn to Rs. 58 bn in Union Budget 07-08.
For the XIth five year plan, GoI is aiming to add 11 mn hectares of irrigational facilities, entailing an investment of Rs. 1580 bn.
? Growth in the real estate sector due to growing population and affluence will require investments in water, drainage and sewage systems.
? GoI in its efforts to reduce crude imports has formulated the New Exploration Licensing Policy for exploration and production of oil and gas. 165 blocks have been awarded till date and the number is set to increase to 245 by 2008.
? Private players like RIL, Cairn 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 40 cities in next 5-7 years.
? In addition to above, replacement demand from USA & 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 FY 07 sales. However, the risk to industry growth could be impending slowdown in US economy, raw material availability and increase in raw material costs and reduction/postponement of GoI spending on infrastructure development
Report Outline
1 Introduction
1.1 Evolution
1.2 Role in Infrastructure Development
1.3 Indian Pipe Scenario
2 Product
2.1 Steel Pipes
2.2 Asbestos Cement Pipes
2.3 Polyvinyl Chloride Pipes
3 Industry Features
3.1 Capital Intensiveness & Fragmentation
3.2 Lower Transportation Losses &Durability
3.3 Cheap Mode of Transport
3.4 Reputation & Accreditations
3.5 Working Capital Intensive
3.6 Duty Structure
3.7 Quality Raw Material Availability
3.8 Range of Products
4 Demand Supply Scenario
4.1 Demand Drivers
4.2 Sales and Exports Statistics
5 Cost & Margin Analysis
5.1 Cost Analysis
5.1.1 Raw Material Cost
5.1.2 Freight & Forwarding Expense
5.1.3 Power & Fuel Cost
5.2 Margin Analysis
6 Analytical Models
6.1 SWOT Analysis
6.2 Porter’s Five Force Model
7 Outlook & Challenges
7.1 Demand Outlook
7.2 Challenges faced by the Industry
8 Company Overview
8.1 Welspun Gujarat Stahl Rohren Ltd
8.2 Indian Hume Pipe Co Ltd
8.3 Man Industries Ltd
8.4 Finolex Industries Ltd
8.5 Jindal Saw Ltd
8.6 Maharashtra Seamless Ltd
8.7 Electrosteel Castings Ltd
Annexure I Existing Gas Pipelines
Annexure II Proposed Gas Pipelines by GAIL and RIL
Annexure III Existing Product Pipelines
Annexure IV Existing Crude Oil Pipelines
Annexure V Oil & Gas Data
Tables
1.1 Petroleum Product Movement by Different Modes in India
2.1 Application & Key Differentiator of Various Types of Pipes
3.1 Working Capital Cycle Data for Key Players
3.2 RM Consumption Details
3.3 RM Price Movement of Key Materials
4.1 Water Supply Projects in India
4.2 Exploratory and Development DrillingActivities in India
4.3 Increase in Refi nery Capacities in India
4.4 Major Oil & Gas Pipelines Planned in India
4.5 International Oil & Gas Projects
4.6 Developed Nations – Gas Pipelines
4.7 Sales of Leading Steel Pipe Companies excluding Seamless Pipes 2001-2007
4.8 Sales of Leading Seamless Players 2001-2007
4.9 Sales of Leading PVC Pipe Players 2001-2007
4.10 Sales of Indian Hume Pipe 2001-2007
4.11 Exports Data 2001-2007
5.1 RM Cost Data
5.2 Freight & Forwarding Expense Data
5.3 Power & Fuel Cost Data
5.4 Average Price Realization of Steel Pipes
5.5 Average Price Realization of Plastic Pipes
5.6 Average Price Realization of Cement Pipes
7.1 Order Book Position of Pipe Companies
Figures
2.1 Classifi cation of Pipes
2.2 Pipe Manufacturing Process
4.1 Pipe Demand Drivers
4.2 Break-up of Demand Drivers
4.3 Rig Count Globally from 2002 to 2006
4.4 Companies Share in Sales – FY 06-07
5.1 RM Price Chart – Steel Products
5.2 RM Price Chart – Cement
5.3 RM Price Chart – PVC & Ethylene
5.4 Cost Analysis Chart – FY 06-07
7.1 Oil & Gas Pipeline Infrastructure – India& Developed Nations
7.2 Sanitation Levels - 2004
8.1 Welspun Gujarat – Share Price Chart
8.2 Indian Hume Pipe - Share Price Chart
8.3 Man Industries - Share Price Chart
8.4 Finolex Industries - Share Price Chart
8.5 Jindal SAW - Share Price Chart
8.6 Maharashtra Seamless - Share Price Chart
8.7 Electrosteel Castings – Share Price Chart
