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Ferrous Metals: Key drivers in 2011 …
�� Demand-supply: Credit tightening by China and a slower recovery in developed economies would see steel demand
growing at a slower pace of 5% in CY11 against 14% in CY10
�� Capacity utilization: To remain low at 79% in CY11 (as compared to the peaks of 87% in CY07), as China alone would
add 30 mn tonnes of steel capacities, resulting in continued pricing pressure
�� Cost of production increasing: However, rising cost of iron ore and coking coal on account of supply disturbance (such
as Indian iron ore export restriction and recent flooding in Australia), would drive the cost of production higher
�� Pricing outlook: Consequently, steel prices would trade in a band, though at ~8% higher as compared to last year’s
average on account of rising cost of inputs. Our FY12 forecast for benchmark steel is USD 650/ t. Thus, despite higher
expected prices, given the much higher increase in input costs, margins would narrow for non-integrated producers
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