Indian Pipe Industry

This publication has been discontinued on June 16, 2011.

Below is the updated product.

Introduction

Abstract

Synopsis

The 2008-09 financial crisis had a limited impact on the Indian pipe industry affecting new oil and gas exploration and production (E&P) projects worldwide due to fall in global commodity prices including crude oil resulting into reduced orders. With the worst of the financial crisis behind us, we remain optimistic regarding the potential demand for the pipe sector. The E&P projects which were earlier stalled or revoked are being given a new lease of life based on the inevitable rise in crude oil prices. Replacement demand from developed nations remains ever so strong while domestic demand from the oil and gas sector is robust. Also, with the pipeline network of India for oil & gas transport being lower at 17,576 kms as on April 2009, (32% penetration level) it represents a huge scope for growth for the pipe industry.

As most of the Indian pipe manufacturers are converters, the industry is highly Raw Material (RM) intensive with the RM cost accounting for more than 70-80% of the total cost for steel and PVC pipe companies. These companies rely heavily on imports and hence many steel pipe companies have backward integration facilities to reduce dependency on imports and price volatility. Freight cost is another key cost component due to higher imports and exports. With the expected short-term increase in commodity prices and range-bound Baltic Dry Index (a barometer for shipping freight rates), pipe companies will be benefited in the coming quarters as customers will try to place advance orders at attractive rates.

Indian companies produce a wide range of steel, cement and plastic 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 and high-quality products supplemented by various international certifications, Indian companies have augmented their export sales over the last three to four years.

CARE Research expects the positive trend in the Indian pipe industry to continue for the next 3-5 years on the back of higher E&P activities due to resurgence in crude oil price, increased efforts by the Government of India (GoI) on infrastructure development for laying pipelines for oil & natural gas transport (e.g. the National Gas Grid project), replacement demand from North America and European countries, water & sewage transport and irrigation facilities. The growth will mainly be driven by steel pipes especially SAW pipes. The order-book position (currently equivalent to total of FY09 sales) of many steel pipe companies is sufficient for the next 9-12 months.

Demand triggers for the growth are:

• Private players like Reliance Industries Limited (RIL), Cairn India etc have shown interest in setting up pipe infrastructure for oil & gas distribution. 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 the next five years, entailing an investment of Rs. 250-300 bn.
• In addition to the above, the replacement demand from the US and European countries, having a vast pipeline infrastructure, will be huge.
• The GoI in its efforts to reduce crude imports has formulated the New Exploration Licensing Policy (NELP) for exploration and production of oil & gas. The GoI has awarded 256 blocks till date and the number is set to increase to 330 by 2010.
• For the Eleventh 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 increased the annual budget allocation under the Rajiv Gandhi Drinking Water Mission from Rs.65 bn to Rs.74bn in the previous Union Budget 2009-10.

Table of Contents

Executive Summary

CARE Research' s Outlook and Challenges (Steel and Plastic Pipes)

Supply - Demand

• Steel Pipes
  • Domestic Installed Capacity of Pipes (FY2009-10)
  • Global Statistics
  • Demand Projection (FY2013-FY2015)
  • Domestic Demand - Supply Gap
• Plastic Pipes
  • Global Market for plastic pipes
  • Domestic market

Demand Drivers

Pricing Information

• Steel Pipes
• PVC Pipes
• Cement Pipes

Cost Analysis

• Raw Materials (RM) Costs
  • Product-wise RM cost Analysis
  • Company-wise RM cost analysis
• Freight and Forwarding Expense
• Power and Fuel (P&F) Cost
• Industry Margins

Analytical Model

• SWOT Analysis
• Porter' s Five Force Model

Company Overview

• Welspun Gujarat Stahl Rohren Ltd
• Man Industries (India) Ltd
• Jindal Saw Ltd
• Electrosteel Castings Ltd
• The Indian Hume Pipe Co. Ltd
• Finolex Industries Ltd

Industry Overview

• Steel pipes
• Seamless pipes
• Electric Resistance Welded Steel Pipes (ERW)
• Spun Pipes
• Ductile Iron Pipes in India
• Asbestos Cement (AC) Pipes
• Characteristic and Applications of HDPE Pipes
  • Key characteristics of HDPE pipes
  • Major applications of HDPE pipes

Industry Characteristics

• Capital Intensiveness and Fragmentation
• Lower Transportation Losses and Durability
• Cheap Mode of Transport
• Reputation and Accreditations
• Working Capital Intensive
• Duty Structure
• Quality Raw Material (RM) Availability
• Range of Products

Annexure

• Key company-wise pipeline projects
• Existing and proposed Gas pipelines in India
• Existing and proposed product pipelines
• GAIL' s proposed pipeline expansion
• Spot OPEC Reference Basket Price (Average) - Oil ($/b)
• Proven Oil & Gas reserves
• Crude Oil Production (1,000 b/d)
• Consumption of refined products (1,000 b/d)
• Sales of leading players in steel pipes excluding seamless pipes
• Sales of seamless pipe players
• Sale of cement pipe player
• Sales of plastic pipe players
• Exports Data
• Chart representing Indian Pipes Industry according to usage
• Performance Global Pipe Companies

Index - Figures

Demand & Supply

• Total global HSAW production
• Total Global LSAW production
• Pipe penetration levels
• World energy consumption by fuel type - Historical and Forecasted
• Life Structure of gas pipeline
• Life Structure of Oil pipeline
• Global Plastic Pipes Market
• Global Plastic pipes market share in 2006
• Europe - Pipe consumption pattern
• USA- Pipe consumption pattern

Pricing Information

• Metal Trends Index Indicating Sentiment on Prices over the next 3 months

Cost Analysis

• Domestic Prices: HR Coils
• Domestic Prices: Billets
• Domestic Prices - Cement (wholesale)
• Domestic Prices - PVC
• International - Ethylene Price Chart
• Baltic Dry Index
• Company-wise Cost Analysis Chart for FY08-09
• Average Industry Ratios

Industry Overview

• Global GDP Growth Rate %
• Domestic GDP Growth Rate %
• Indian Rural - Urban population divide
• Dismal Sanitation Levels
• Classifications of Pipes
• DI pipes: Major players and Market share
• Pipe manufacturing process
• Demand drivers
• Pipe demand drivers
• Break-up of demand drivers for pipe industry

Index - Tables

Supply -Demand

• Domestic SAW and Seamless pipes capacity scenario (FY2009-10)
• Global (excluding India) planned HSAW Pipe Capacities
• Globally planned LSAW Pipe Capacities
• Global (excluding India) planned ERW pipe capacities
• Major Transnational gas pipeline projects
• Major oil & gas pipeline projects planned in India
• Global pipeline projects - Region wise demand till 2014
• Several large pipeline projects planned in N. America
• Order book position of pipe companies (as of December 2009)
• oil & gas pipeline mileage in US
• Existing Gas Pipelines in other Developed Nations
• Active Water Supply and Irrigation projects in India
• Region-wise Current Gas Usage (%)
• Gas Demand-Projections for the Eleventh-Plan (in mmscmd)
• Exploratory and Development Drilling activities in India
• Metreage Drilled
• Global per capita Consumption of Plastics (kgs)
• Total Domestic Pipe demand
• Total Domestic Plastic Pipe Demand

Pricing Information

• Average price realisations of steel pipes
• Average price realisations of PVC Pipes
• Average price realisations of PVC Pipes

Cost Analysis

• RM consumption
• RM expense as a % of total cost
• RM Cost Analysis - Product-wise
• Cement Price Chart
• HDPE India broad statistics
• Domestic and International HDPE - Average Raw Material Prices
• Domestic Average RM prices
• Freight expense as a % of total cost
• Freight expense (Rs. cr.)
• Power & Fuel expense as a % of total cost
• Power & Fuel expense (Rs cr.)
• Average Industry Ratios

Industry Overview

• Applications of various types of steel / iron pipes and their other key parameters

Industry Characteristics

• Certifications & Accreditations by major pipe companies
• Working Capital cycle
• RM price movement for key materials is presented below
• RM consumption details for FY09

Press Release

Pipe sector demand in India looks optimistic towards future

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