CHICAGO India and the
Middle East represent the best prospects for future steel
demand growth, according to Robert M. Miller, chief executive
officer at investment bank Miller Mathis Group Inc.
"India may hold the
opportunities that people used to think would develop in
China," Miller said at Platts 9th Annual Steel Markets
North America Conference in Chicago.
India currently produces 80
million tons of steel per year, but some experts say the market
could grow to 200 million tons by 2020 thanks to a middle class
of some 300 million people.
Miller acknowledged that
Luxembourg-based ArcelorMittal SA and Pohang, South Korea-based
Posco Ltd. both failed to get the necessary approvals to build
greenfield mills in the country. "India is very complicated,"
he said. "You can have a five-star hotel across the street from
a neighborhood filled with hovels."
But even though 1 billion people
still live in poverty in India, those supplying the middle
class will be "looking for every kind of raw material and for
the long term," Miller said
U.S. companies tend to think in
the short term and are unlikely to invest in iron ore mines if
they see the market as oversupplied, he said. "But long-term
population growth (domestically and globally) will by necessity
require infrastructure, which needs steel."
At one time, even Indian
companies didnt want to invest in coal, deeming the North
American product too expensive and costly to transport. But
when natural gas discoveries sent U.S. coal prices down, it
became economical for India to buy it.
"The amount of demand for raw
materials is outstanding," Miller said, noting that
Mumbai-based Tata Group alone needs 200 million tons of thermal
coal annually. "I wouldnt count coal out," he said.
"People still need it."
The Middle East was a "steel
production backwater" until very recently, producing about 20
million of the worlds 1.5 billion tons, Miller said, but
his New York-based firm has been talking with the Saudis about
their plans to build seven industrial cities over the next
decade. "The amount of steel needed for this will be enormous,"
Asset prices are down across the
board and mergers and acquisitions are at an all-time low,
Miller noted. "You want to buy (companies) when prices are low,
if you have the wherewithal and the stomach to do it."