Steel Structures vs Concrete

7/29/2019 Steel Structures vs Concrete

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Conference Paperon Steel Structures

April 2012

www.deloitte.com/in


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3/16Conerence Paper on Steel Structures 3

Contents

Steel Structures in India: An Overview 4

Delivery Models or Steel Structures:

Onsite vs. Workshop Fabrication 6

Key Application Segments or Steel Structures:

An Indian Perspective 8

Building Segment: The Next Big Thing 10

Key Drivers: Providing Impetus to Steel Structures

Demand in India 12

The Future: A Directional View o the Steel

Structures Market 13

Conclusion 14


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Steel Structures In India: An Overview

The per capita consumption or steel structures in India

is currently between ~6-7 Kgs, growing at a CAGR o

over 10% since the past ve years. This market has

witnessed a higher growth as compared to both the

Indian steel GDP as well as the Indian construction

GDP, driven by large investments in industry and

inrastructure, the two key end use segments or steel

structures in India.

The types o steel sections used in India or both

structural steel and pre-engineered buildings (PEB) are

mentioned in Exhibit 1 below

Exhibit 1: Steel structures Typical sections, characteristics and key application areas

Type o Steel Sections

Light

Typical PEB Range Rarely Prevalent

Medium

Typical Structural Steel Range

Heavy Extra Heavy

Characteristics

PEB Structural Steel

Key Application

Areas

Relatively simple and standard designs/ sections

Type o sections used Only plate abricated sections

Business Model ollowed Mainly workshop

abrication

Erection outsourced to certied erectors who

assemble ready modules on site

Speed o delivery at lowest cost is critical

Factory buildings o small/ medium scale industrieslike FMCG, agro industry, ood & beverages, pharma-

ceuticals, textile, etc.

Inrastructure acilities like warehouses, airports,

metro stations, etc.

Light/ medium buildings like retail outlets, automobile

showrooms, etc.

Typically customized designs, which may be more

complex in nature

Type o sections used Mix o hot rolled, proles and

plate abrication sections

Business Model ollowed Combination o on-site

(predominant) and workshop

Erection Generally in-house capabilities required to

abricate/ erect sections on site

Heavy industries like steel, cement, oil & gas, etc.

Inrastructure acilities like power plant, aircrat

hangers, railway bridges, etc.

Buildings like high-rises, large shopping malls, etc.

Cross-over rom PEB to Structural Steel

Note: Type o sections indicated above are based on section weights



In India, structural steel fabricatorspredominantly follow on-site fabricationmodel, while globally all steel structures arefabricated in workshop.

Exhibit 2: Typical Value Chain or steel structures in India

Value Chain o Steel Structures in India

The abrication model ollowed in India or structural

steel diers rom the model ollowed in a developed

country. Typically in a developed country, all steel

structures including structural steel and PEB are

abricated in the workshop. While in India, structural

steel has traditionally been abricated on-site, mainly

due to lack o inrastructure or transporting heavy

sections rom an o-site workshop to project site,

sucient space on-site to set-up abrication workshop

and availability o inexpensive skilled labour at the

project site. Pre-engineered Buildings, however, are

abricated in the workshop even in India.

Fabricators o steel structures mainly undertake

abrication and erection jobs. The typical activities/ value

chain or a steel structures abricator is mentioned in

Exhibit 2 below

Demand or steel is primarily

met by the domestic

suppliers

Primary steel producers

cater to demand or larger

hot rolled sections and steel

plates (or Plate Fabricated

Sections)

Unorganised sector

(Re-Rolling Mills) cater

to supply o smaller and

medium sized sections in the

regional markets

The demand or extra heavy

rolled sections (>700 mm)

is primarily met through

imports

Structural steel abricators

and PEB players abricate

sections/ modules using steel

plates

PEB ollows workshop abri-

cation model, while structural

steel pre-dominantly ollows

on-site abrication model

Other intermediaries

involved in the value chain

are technical consultant,

structural steel detailer, EPC

contractor and erection

contractor

In case o PEBs, certied

builders erect the various

modules o the building

on-site as supplied by the PEB

player

A large portion o abrica-

tion in case o structural

steel happens on site, hence

it is imperative or a struc-

tural steel abricator to have

in-house erection acilities

as abrication happens in

conjunction with erection

Hot rolled sections are

typically erected directly on

site

Steel Supply Fabrication Erection


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The steel structures industry broadly ollows two models o delivery namely the Onsite and the Workshop Models as d iscussed below.

Delivery Models for SteelStructures: Onsite vs. Workshop

Fabrication

Onsite Fabrication Model Workshop Fabrication Model

Brie

Overview

Typically used or industrial and inrastructure

projects

Technical consultant creates the basic designs

which are then detailed by a structural steeldetailer

The steel (hot rolled sections and plates) is

supplied on-site either by turnkey contractor or

by the client, and seldom by steel abricator

The structural steel abrication and erection (F&E)

contractor is responsible or equipments and

skilled labor

Mostly applicable or PEBs and building segment (prominently or

high rise buildings)

Certied builders (in case o PEB) or a abrication and erection

(F&E) contractor (or buildings) are responsible or projectmanagement & delivery

Design is done in-house or could be provided by the project

developer/ structural consultant to the abricator

Steel (HRS and/ or plates) is procured by the PEB players/ F&E

contractor

Bulk o abrication activity is carried out in the workshop o the

PEB player/ F&E contractor (with in-house skilled labor) and the

abricated sections are transported on-site

Value Propositions o Delivery Models

Market Coverage Site Fabrication Model can enable a contractor to

take on projects across the country model per

se has no geographic limitations

Geographical limitations due to logistics/ transportation

constraints can cater to clients within a narrow geography o

~500 km radiusSite Limitations Cannot be employed in Building construction

sites due to space constraints at site. No such

limitations or industrial/ inrastructure projects

Since abrication activity is osite, no such restriction

High-rise building construction may throw challenges in terms

o managing erection activities (sometimes or complex sections)

within space constraints

Labor Flexibility to employ labor rom a contractor as

required

Need to maintain a pool o skil led workorce in-house or abrica-

tion and erection (in case o buildings) which increases costs

Contractual

Specifcations

Many times, site abrication clause is stipulated

by the Turnkey Contractor or ease o monitoring

and control

The contract may also include a clause o quality inspection at

the workshop by client supervisor i elt necessary

Delivery Costs Since abrication is onsite, there are no additional

delivery costs involved

Additional costs o delivery (~2-3%) rom workshop to site,

increases the overall costs o execution

Tax Implications Comparatively advantageous as contract is

treated as works contract, attracting only service

tax

Cost o project increases due to additional excise duty on the

abricated components delivered rom workshops (typically excise

duty adds ~2-4% more to the overall cost o the project)

Future Trends In advanced economies, workshop model is prevalent and preerred unless sections are complex in nature and hence,

are orced to abricate on site. In the Indian context, the delivery models are in evolution stage and in industrial segment,

there are early indicators o change towards workshop abrication especially or power segment



Workshop delivery model is prevalent in PEB and Buildingssegment, and there are early indicators of change in

preference in industrial segment especially for power.


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Key Application Segments forSteel Structures: An Indian

Perspective

Industry segment remains the key demand

driver for steel structures in India.

Key End Application Segments

Although industry and inrastructure segments have

shown avorable trends in usage o structural steel,

the building segment (especially residential) is still in a

nascent stage in terms o acceptance o structural steel

as a avorable building material.

The industry segment has the largest share o

demand or steel structures in India, ollowed by the

inrastructure segment.

Within the industrial segment, steel and cement

industries account or a large share o demand o

structural steel, while actory buildings dominates the

demand or PEB.

Within the inrastructure segment, the demand or

structural steel is mainly driven by power sector, while

logistics/ warehousing applications drive demand or PEB

in India.

Other segments, mainly transport industry (construction

o wagons/ coaches, ships, trucks/ trailers, etc.), OEM

and plant equipment abrications, and other areas like

railings, scaoldings, etc. account or a small share o

demand or steel structures

IndustryInfrastructure

Buildings

Other sectors

50-60%

15-20%

20-25%



Preerence or steel vis--vis cement

For each application within these segments, there is a varying preerence or steel vis--vis cement, which is shown

below

Application Area Preerence Comments

Industry

Steel, Aluminium, Cement, Fertilizers, Oil and

Gas, Petrochem, etc.

Within the Industry segment, steel sector is the

key application area or structural steel.Structural steel is mainly used in construction o

plant superstructures.

Factory buildings/ Warehouses PEB constructions are preerred in the case o

actory buildings/ warehouses. Concrete nds

limited preerence as a construction material

within this segment.

Inrastructure

Power plants/ Transmission towers Power sector (power plants and transmission

towers) is one o the key demand drivers within

inrastructure segment since steel is the deault

material o construction.

Telecom towers Structural steel is the deault material or

construction o telecom towers

Airports/ Metro rail Preerence or steel has gradually increased in

this segment, due to innovative designs being

adopted.

Bridges/ Flyovers Concrete is the deault material or bridges/

fyovers. Structural steel is preerred in the case

o railway bridges, especially in earthquake

sensitive regions and projects which require quick

turn-around.

Buildings

Residential/ Commercial buildings Concrete remains the deault construction

material within this segment primarily due to

the prevailing mindset and inhibition to change.

Structural steel has limited preerence in the case

o select high-rise building projects.

Shopping malls Structural steel has steadily been gaining pre-

erence with the advent o new designs or

shopping malls.

Other Areas

Transport industry, OEM & plant equipment,

Railings, Scaoldings, etc.

Steel is the deault material or most o these

other applications.

Structural SteelConcrete


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Building Segment: Te NextBig Ting

The building segment in India is presently dominated by

concrete. The building segment has been slow to adopt

the global construction practices, even in the metro-

politan cities. The limited availability o certain structural

sections have also been responsible or the limited

penetration o structural steel in the building segment.

Exhibit 4 compares demand or structural steel rom

building segments or UK, USA and India indicating

the low contribution o structural steel rom buildings

segment in India.

Exhibit 5 provides a relationship between the degree o

maturity o an economy and its impact on use o struc-

tural steel in building segment within that economy.

It is seen that as a countrys economy matures, the

demand or structural steel shits rom non-building

segment to building segment.

Structural steel usage in building segment in India is

presently driven by exception rather than practice.Penetration o structural steel in overall buildings

segment is currently at



Structural Steel demand in building segmentis expected to evolve in the future.


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Key Drivers: ProvidingImpetus to Steel Structures

Demand in IndiaThe industry and inrastructure segments are currently

the two main segments contributing to the overall

demand o steel structures in India. At present the pene-

tration o structural steel in building segment is small,

primarily due to preerence towards the use o concrete.

However, this is expected to change in the uture, over

medium to long term timerame.

Structural Steel

Structural Steel is the deault material used or construc-

tion o plant superstructure within the industry segment.

Steel industry is a key demand driver within the indus-

trial segment. Oil & gas, petrochem, cement, ertilizers,

etc. are amongst the other industries responsible to

drive demand within this segment.

Structural steel remains the deault material within the

power sector driven by huge investments and capacity

additions in new power plants and transmission towers.

Increased government spending in the inrastructure

segment, estimated to the tune o ~$1 Tn. over next 5years is expected to result in huge demand in various

sectors, especially airports, sea ports, railway stations,

railway bridges and metro rail.

Private sector investments in telecom towers and

shipyards are some o the other drivers or structural

steel demand within the inrastructure segment.

PEB

The demand or PEB in India is expected to be driven by

the logistics and retail sectors, which require large PEB

structures as warehouses and retail space.

In addition, penetration o PEB in actory buildings is

increasing, as the manuacturing sector, mainly small

scale industries, is recognizing the advantages o using

PEB over conventional concrete buildings.

Buildings A Shit in Mindset

Concrete remains as the deault construction material in

the buildings segment. Structural steel is being selec-

tively used in construction o high-rise buildings with

~3-4 projects using steel/ composite structures coming

up annually in India mainly in the metropolitan cities

constrained by limited land mass availability. Fabricators

and developers are now recognizing the advantages o

using structural steel over RCC, which has resulted in a

slow but gradual shit o preerence towards structural

steel within buildings segment.

There is a recent trend o using metal buildings as an

option or aordable housing. These are typically small

metal buildings, complete with civil oundations, elec-

trical, plumbing and drainage solutions.

Structural

Robustness

Increased

Government

InvestmentsAesthetic

Look

Reduced

Delivery

Time

Design

FlexibilityShift in

Mindset

EnvironmentallyFriendly

Models

Achieved

Evolution of

Domestic

Fabrication

Capabilities

Re-usability of

Construction

Material

Exhibit 7: Key Factors Driving Growth



Te Future: A DirectionalView of the Steel Structures

Market

The per capita consumption or structural steel and PEB in India is currently hovering at around 6.2 Kgs. However,

ater considering ollowing key parameters, the overall per capita consumption o structural steel and PEB or India

over the next 10 years has a potential to look even more attractive with the overall indicative potential reaching

~17-22 Kgs per capita.

The growth of steel structures and PEB demand in Indiais expected to be driven by robust economic growth and agradual change in mindset.

Parameters Indicative Consumption

(Kgs per Capita)

Description

Market SizeCurrent

Market Size

(2011-12)

Growth based

on current

Economy

At current levels of economic growth,there is

potentialto increase per capita consumptionby

~6.5-9.6 Kgs over next10 years.Economic

FactorsRobust

Economic

Growth

Incremental

Taking into account the strong growthshown

by the Indian economy, there is potential to

increase per capita consumption by ~5.2-6.4

Kgs over next 10 years.

Change in

Mindset

Buildings

Segment

Bridges/

Flyovers/

Metro Rail

Projects

E volution in building designs coupled withpossible shift of preference towards structural

steel, there is potential of increasing the per

capita consumptionby ~0.15-0.25 Kgs over the

next10 years.

With significant investment in the infrastructure

segment and application of latest designs,

there is potential of increasing overall per

capita consumptionof structural steel and PEB

by ~0.05-0.10 Kgs over the next 10 years.

Overall Indicative Potential

being generated over next10 years

Indicative Estimate

Chart not to scale

SS: ~4.9-7.1PEB: ~1.7-2.5

SS: ~3.6-4.3PEB: ~1.6-2.1

SS: ~ 0.15-0.25

SS + PEB:~0.05-0.10

Structural Steel (SS) Pre-engineered Buildings (PEB)

SS: ~5.5PEB: ~0.7

SS: ~14.6-17.2PEB: ~4.2-5.6

Overlap between SS & PEB

Source: Deloitte Research


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Conclusion

Against a backdrop o an uncertain global environment,

the Indian economy aced multiple macroeconomic

challenges in scal year 2011-12, due to which it regis-

tered a lower growth o ~6.9% in FY 2011-12. However,

demand or steel structures in India maintained its high

growth path driven by increased emphasis on inrastruc-

ture development by Government o India and demand

rom the industrial segment.

While concluding this conerence paper, based on

current trends it is important to note the ollowing:

Strong internal demand and emphasis on developing

inrastructure can be expected to remain the ounda-

tion on which the Indian growth story would be built

in the uture

Industry and inrastructure segments can be expected

to remain the key demand drivers or steel structures

in India over the next 5 years steel and power

would drive demand or structural steel, while actory

buildings, retail buildings and warehouses would drive

demand or PEB in India

Usage o structural steel in building segment is

currently driven by exception rather than practice.

In uture, share o building segment is expected to

increase in the overall demand or steel structures

as developers are recognizing the benets o using

structural steel in buildings

Presently, the Indian structural steel industry mainly

employs the on-site model o abrication or industry

and inrastructure segments. Workshop delivery model

is prevalent in PEB and buildings segment. There are

early indicators o change in preerence in the indus-

trial segment especially or power rom on-site to

workshop model

Overall, there is good potential or steel structures in

India owing to robust economic growth, increased

government spending on inrastructure and change

in mindset with regards to use o structural steel in

building and other inrastructure segments



Notes


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