The Indian Pre-Engineered Steel Buildings (PEB) market is experiencing robust growth fueled by infrastructure development and the increasing popularity of PEB systems in the industrial sector. Sectors such as automotive, power, logistics, pharma, FMCG, and capital goods provide huge growth opportunity for PEB in India.
Frost & Sullivan’s Analysis of the Indian PEB market finds that the market earned revenues of Rs 5,297 crore in 2012 and estimates this to reach Rs 13,612 crore in 2016, at a compounded annual growth rate (CAGR) of 26.6%.
The structural steel buildings market in India was around 5.0 to 5.5 million MT in 2011, of which around 9.5-10% accounted for the PEB market in India. It is expected that the market in terms of volumes will reach 9,00,000 MT by 2016, at CAGR of 11.1%.
Key challenges include increasing cost and shortage of skilled manpower, presence of alternative building structure (both steel and concrete) and fluctuating raw material (steel) prices, which account for 55 to 60% of the overall cost. These will certainly affect the price trend and impact the profit margin of the supplier in the long run as competition intensifies. These challenges shall be directly attributed to the lower penetration of PEB in India.
“The PEB market is strongly associated with investments and growth in the industrial and commercial sectors. The new potential application areas for PEB in the next few years will include power plant structures, factory buildings, commercial buildings (offices and retail malls), warehouses, and metro stations,” noted Frost & Sullivan’s senior research analyst.
The Government of India has set a massive target for developing infrastructure in the 12th Five Year Plan (FYP) 2012-17 at an estimated cost of Rs 4,090,000 crore, of which nearly 33-34% have been allocated for the power sector, with an additional target of 90,000 MW.
Currently, the thermal power capacity stands at 140,976 MW, and with the proposed capacity addition of 50,000 MW in the 12th FYP, it will provide huge growth opportunity for PEB in this sector.
The commercial building sector in India is estimated to reach a target of 20.44 billion square feet by 2030 from 7 billion square feet in 2010. It is expected that nearly 34% of the 2030 target had already been constructed and about 66% of the building stock is yet to be constructed.
With manufacturing activity increasing in the last few years, logistics has gained equal importance in order to provide better goods at lesser cost. It is also observed that India has around 7,500 cold storage facilities with a capacity of 35MT. The addition in capacity to the cold store and warehousing would also trigger the PEB market in India.
With the onset and speedy progress of the Metro rail system in the next 10 years, the scope of PEB is immense. Increase in technical competence plays a crucial role, and many market participants have introduced high-grade steel conforming to ASTM Grade 50 steel (light weight and recyclable) without compromising on the product quality, which attracted many customers to pay high prices for quality jobs.
The heightened emphasis on green building construction is also poised to push market expansion. For instance, to increase energy-efficiency, many PEB manufacturers have developed high efficiency windows and insulation for roofs, walls, ceilings & floors. The use of sky lights and solar panels on rooftops will meet daylight and captive power requirements, while, at the same time, reducing emissions and gaining carbon credits under clean development mechanism (CDM).
Many leading international and domestic market participants are increasingly scouting for opportunities by adopting multiple business strategies such as venturing into engineering design, project contracting, manufacturing heavy structural steel buildings, and focusing on vertical integration whereas, merger & acquisition strategy will support them to grow inorganically and enable them to broaden their geographic reach and product portfolios.