Conference Paper

on Steel Structures

April 2012
www.deloitte.com/in

Contents

Steel Structures in India: An Overview

Delivery Models for Steel Structures:

Onsite vs. Workshop Fabrication

Key Application Segments for Steel Structures:

An Indian Perspective

Building Segment: The Next Big Thing

10

Key Drivers: Providing Impetus to Steel Structures

Demand in India

12

The Future: A Directional View of the Steel

Structures Market

13

Conclusion

14

Conference Paper on Steel Structures

Steel Structures In India: An Overview

The per capita consumption for steel structures in India

is currently between ~6-7 Kgs, growing at a CAGR of
over 10% since the past five 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

infrastructure, the two key end use segments for steel

structures in India.
The types of steel sections used in India for 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 of Steel Sections
Light

Medium

Typical PEB Range

Heavy

Extra Heavy

Rarely Prevalent
Typical Structural Steel Range
Cross-over from PEB to Structural Steel
PEB

Characteristics

Key Application
Areas

Relatively simple and standard designs/ sections

Type of sections used Only plate fabricated sections
Business Model followed Mainly workshop
fabrication
Erection outsourced to certified erectors who
assemble ready modules on site
Speed of delivery at lowest cost is critical

Factory buildings of small/ medium scale industries

like FMCG, agro industry, food & beverages, pharmaceuticals, textile, etc.
Infrastructure facilities like warehouses, airports,
metro stations, etc.
Light/ medium buildings like retail outlets, automobile
showrooms, etc.

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

Structural Steel

Typically customized designs, which may be more

complex in nature
Type of sections used Mix of hot rolled, profiles and
plate fabrication sections
Business Model followed Combination of on-site
(predominant) and workshop
Erection Generally in-house capabilities required to
fabricate/ erect sections on site

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

Infrastructure facilities like power plant, aircraft
hangers, railway bridges, etc.
Buildings like high-rises, large shopping malls, etc.

In India, structural steel fabricators

predominantly follow on-site fabrication
model, while globally all steel structures are
fabricated in workshop.
Value Chain of Steel Structures in India
The fabrication model followed in India for structural
steel differs from the model followed in a developed
country. Typically in a developed country, all steel
structures including structural steel and PEB are
fabricated in the workshop. While in India, structural
steel has traditionally been fabricated on-site, mainly
due to lack of infrastructure for transporting heavy
sections from an off-site workshop to project site,

sufficient space on-site to set-up fabrication workshop

and availability of inexpensive skilled labour at the
project site. Pre-engineered Buildings, however, are
fabricated in the workshop even in India.
Fabricators of steel structures mainly undertake
fabrication and erection jobs. The typical activities/ value
chain for a steel structures fabricator is mentioned in
Exhibit 2 below

Exhibit 2: Typical Value Chain for steel structures in India

Steel Supply

Demand for steel is primarily

met by the domestic
suppliers
Primary steel producers
cater to demand for larger
hot rolled sections and steel
plates (for Plate Fabricated
Sections)
Unorganised sector
(Re-Rolling Mills) cater
to supply of smaller and
medium sized sections in the
regional markets
The demand for extra heavy
rolled sections (>700 mm)
is primarily met through
imports

Fabrication

Structural steel fabricators

and PEB players fabricate
sections/ modules using steel
plates
PEB follows workshop fabrication model, while structural
steel pre-dominantly follows
on-site fabrication model
Other intermediaries
involved in the value chain
are technical consultant,
structural steel detailer, EPC
contractor and erection
contractor

Erection

In case of PEBs, certified

builders erect the various
modules of the building
on-site as supplied by the PEB
player
A large portion of fabrication in case of structural
steel happens on site, hence
it is imperative for a structural steel fabricator to have
in-house erection facilities
as fabrication happens in
conjunction with erection
Hot rolled sections are
typically erected directly on
site

Conference Paper on Steel Structures

Delivery Models for Steel

Structures: Onsite vs. Workshop
Fabrication
The steel structures industry broadly follows two models of delivery namely the Onsite and the Workshop Models as discussed below.

Brief
Overview

Onsite Fabrication Model

Workshop Fabrication Model

Typically used for industrial and infrastructure

projects
Technical consultant creates the basic designs
which are then detailed by a structural steel
detailer
The steel (hot rolled sections and plates) is
supplied on-site either by turnkey contractor or
by the client, and seldom by steel fabricator
The structural steel fabrication and erection (F&E)
contractor is responsible for equipments and
skilled labor

Mostly applicable for PEBs and building segment (prominently for

high rise buildings)
Certified builders (in case of PEB) or a fabrication and erection
(F&E) contractor (for buildings) are responsible for project
management & delivery
Design is done in-house or could be provided by the project
developer/ structural consultant to the fabricator
Steel (HRS and/ or plates) is procured by the PEB players/ F&E
contractor
Bulk of fabrication activity is carried out in the workshop of the
PEB player/ F&E contractor (with in-house skilled labor) and the
fabricated sections are transported on-site

Value Propositions of 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 of
~500 km radius

Site Limitations

Cannot be employed in Building construction

sites due to space constraints at site. No such
limitations for industrial/ infrastructure projects

Since fabrication activity is offsite, no such restriction

High-rise building construction may throw challenges in terms
of managing erection activities (sometimes for complex sections)
within space constraints

Labor

Flexibility to employ labor from a contractor as

required

Need to maintain a pool of skilled workforce in-house for fabrication and erection (in case of buildings) which increases costs

Contractual
Specifications

Many times, site fabrication clause is stipulated

by the Turnkey Contractor for ease of monitoring
and control

The contract may also include a clause of quality inspection at

the workshop by client supervisor if felt necessary

Delivery Costs

Since fabrication is onsite, there are no additional

delivery costs involved

Additional costs of delivery (~2-3%) from workshop to site,

increases the overall costs of execution

Tax Implications

Comparatively advantageous as contract is

treated as works contract, attracting only service
tax

Cost of project increases due to additional excise duty on the

fabricated components delivered from workshops (typically excise
duty adds ~2-4% more to the overall cost of the project)

Future Trends

In advanced economies, workshop model is prevalent and preferred unless sections are complex in nature and hence,
are forced to fabricate on site. In the Indian context, the delivery models are in evolution stage and in industrial segment,
there are early indicators of change towards workshop fabrication especially for power segment

Workshop delivery model is prevalent in PEB and Buildings

segment, and there are early indicators of change in
preference in industrial segment especially for power.

Conference Paper on Steel Structures

Key Application Segments for

Steel Structures: An Indian
Perspective
Key End Application Segments
Although industry and infrastructure segments have
shown favorable trends in usage of structural steel,
the building segment (especially residential) is still in a
nascent stage in terms of acceptance of structural steel
as a favorable building material.
The industry segment has the largest share of
demand for steel structures in India, followed by the
infrastructure segment.

Exhibit 3: Application of Steel structures in end-use segments

15-20%

<5%
50-60%

Within the industrial segment, steel and cement

industries account for a large share of demand of
structural steel, while factory buildings dominates the
demand for PEB.
Within the infrastructure segment, the demand for
structural steel is mainly driven by power sector, while
logistics/ warehousing applications drive demand for PEB
in India.
Other segments, mainly transport industry (construction
of wagons/ coaches, ships, trucks/ trailers, etc.), OEM
and plant equipment fabrications, and other areas like
railings, scaffoldings, etc. account for a small share of
demand for steel structures

20-25%

Industry
Infrastructure

Buildings
Other sectors

Source: Deloitte Research

Industry segment remains the key demand

driver for steel structures in India.

Preference for steel vis--vis cement

For each application within these segments, there is a varying preference for steel vis--vis cement, which is shown
below

Application Area

Industry

Infrastructure

Preference

Steel, Aluminium, Cement, Fertilizers, Oil and

Gas, Petrochem, etc.

Within the Industry segment, steel sector is the

key application area for structural steel.
Structural steel is mainly used in construction of
plant superstructures.

Factory buildings/ Warehouses

PEB constructions are preferred in the case of

factory buildings/ warehouses. Concrete finds
limited preference as a construction material
within this segment.

Power plants/ Transmission towers

Power sector (power plants and transmission

towers) is one of the key demand drivers within
infrastructure segment since steel is the default
material of construction.

Telecom towers

Structural steel is the default material for

construction of telecom towers

Airports/ Metro rail

Preference for steel has gradually increased in

this segment, due to innovative designs being
adopted.

Bridges/ Flyovers

Concrete is the default material for bridges/

flyovers. Structural steel is preferred in the case
of railway bridges, especially in earthquake
sensitive regions and projects which require quick
turn-around.

Residential/ Commercial buildings

Concrete remains the default construction

material within this segment primarily due to
the prevailing mindset and inhibition to change.
Structural steel has limited preference in the case
of select high-rise building projects.

Shopping malls

Structural steel has steadily been gaining preference with the advent of new designs for
shopping malls.

Transport industry, OEM & plant equipment,

Railings, Scaffoldings, etc.

Steel is the default material for most of these

other applications.

Buildings

Other Areas

Comments

Concrete

Structural Steel

Conference Paper on Steel Structures

Building Segment: The Next

Big Thing
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 metropolitan cities. The limited availability of certain structural
sections have also been responsible for the limited
penetration of structural steel in the building segment.

Exhibit 4: Demand from building segment

65-70%
35-40%

Exhibit 4 compares demand for structural steel from

building segments for UK, USA and India indicating
the low contribution of structural steel from buildings
segment in India.
Exhibit 5 provides a relationship between the degree of
maturity of an economy and its impact on use of structural steel in building segment within that economy.
It is seen that as a countrys economy matures, the
demand for structural steel shifts from non-building
segment to building segment.
Structural steel usage in building segment in India is
presently driven by exception rather than practice.
Penetration of structural steel in overall buildings
segment is currently at <2%. However, this trend has
seen a change over the past 2-3 years as developers
are realizing the advantages of using structural steel
in building segment. As seen below in Exhibit 6, the
benefits of using structural steel in building segment
out-weighs the challenges over the next 10 years.

Low contribution
from building
segment

<5%

USA

UK

India

Source: Deloitte Research

Exhibit 5: Maturity of economy & its impact on key demand segments

Building Segment drives demand for Structural Steel
Developed
Countries

Building
Segment

Non-Building
Segment

Non-Building Segment drives demand for Structural Steel

Developing
Countries

Building
Segment

Source: Deloitte Research

Building Segment

Non-Building
Segment

Non-Building Segment

Exhibit 6: Benefits and challenges of using structural steel in building segment

Faster construction
Overcomes space constraints at project site
Large clear spans
High load bearing strength with low weight
Causes lower pollution compared to concrete
Re-usability of steel at end of life cycle
Better aesthetic appeal

Benefits

10

Challenges

Technical capability of Architects/ Structural

Consultants to design steel buildings
Availability of requisite sections
Cost effectiveness
Change in mindset

Structural Steel demand in building segment

is expected to evolve in the future.
Conference Paper on Steel Structures

11

Key Drivers: Providing

Impetus to Steel Structures
Demand in India
The industry and infrastructure segments are currently
the two main segments contributing to the overall
demand of steel structures in India. At present the penetration of structural steel in building segment is small,
primarily due to preference towards the use of concrete.
However, this is expected to change in the future, over
medium to long term timeframe.

~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 of
using structural steel over RCC, which has resulted in a
slow but gradual shift of preference towards structural
steel within buildings segment.

Structural Steel
Structural Steel is the default material used for construction of plant superstructure within the industry segment.
Steel industry is a key demand driver within the industrial segment. Oil & gas, petrochem, cement, fertilizers,
etc. are amongst the other industries responsible to
drive demand within this segment.

There is a recent trend of using metal buildings as an

option for affordable housing. These are typically small
metal buildings, complete with civil foundations, electrical, plumbing and drainage solutions.

Structural steel remains the default material within the

power sector driven by huge investments and capacity
additions in new power plants and transmission towers.
Increased government spending in the infrastructure
segment, estimated to the tune of ~$1 Tn. over next 5
years 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 of the other drivers for structural
steel demand within the infrastructure segment.
PEB
The demand for 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 of PEB in factory buildings is
increasing, as the manufacturing sector, mainly small
scale industries, is recognizing the advantages of using
PEB over conventional concrete buildings.
Buildings A Shift in Mindset
Concrete remains as the default construction material in
the buildings segment. Structural steel is being selectively used in construction of high-rise buildings with

12

Exhibit 7: Key Factors Driving Growth

Increased
Government
Investments

Reduced
Delivery
Time

Environmentally
Friendly
Models
Achieved

Structural
Robustness

Design
Flexibility

Evolution of
Domestic
Fabrication
Capabilities

Aesthetic
Look

Shift in
Mindset

Re-usability of
Construction
Material

The Future: A Directional

View of the Steel Structures
Market
The growth of steel structures and PEB demand in India
is expected to be driven by robust economic growth and a
gradual change in mindset.
The per capita consumption for structural steel and PEB in India is currently hovering at around 6.2 Kgs. However,
after considering following key parameters, the overall per capita consumption of structural steel and PEB for 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.
Indicative Estimate
Indicative Consumption
(Kgs per Capita)

Parameters

Market Size

Economic
Factors

Current
Market Size
(2011-12)
Growth based
on current
Economy
Robust
Economic
Growth
Incremental

Buildings
Segment

Description

SS: ~5.5
PEB: ~0.7

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

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

Taking into account the strong growth shown

by the Indian economy, there is potential to
increase per capita consumption by ~5.2-6.4
Kgs over next 10 years .

SS: ~ 0.15-0.25

E volution in building designs coupled with

possible shift of preference towards structural
steel, there is potential of increasing the per
capita consumptionby ~0.15-0.25 Kgs over the
next 10 years .

SS + PEB:
~0.05-0.10

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 .

Change in
Mindset
Bridges/
Flyovers/
Metro Rail
Projects

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

Overall Indicative Potential

being generated over next
10 years
Chart not to scale

At current levels of economic growth, there is

potentialto increase per capita consumptionby
~6.5-9.6 Kgs over next 10 years .

Structural Steel (SS)

Pre-engineered Buildings (PEB)

Overlap between SS & PEB

Source: Deloitte Research

Conference Paper on Steel Structures

13

Conclusion

Against a backdrop of an uncertain global environment,

the Indian economy faced multiple macroeconomic
challenges in fiscal year 2011-12, due to which it registered a lower growth of ~6.9% in FY 2011-12. However,
demand for steel structures in India maintained its high
growth path driven by increased emphasis on infrastructure development by Government of India and demand
from the industrial segment.
While concluding this conference paper, based on
current trends it is important to note the following:
Strong internal demand and emphasis on developing
infrastructure can be expected to remain the foundation on which the Indian growth story would be built
in the future
Industry and infrastructure segments can be expected
to remain the key demand drivers for steel structures
in India over the next 5 years steel and power
would drive demand for structural steel, while factory

14

buildings, retail buildings and warehouses would drive

demand for PEB in India
Usage of structural steel in building segment is
currently driven by exception rather than practice.
In future, share of building segment is expected to
increase in the overall demand for steel structures
as developers are recognizing the benefits of using
structural steel in buildings
Presently, the Indian structural steel industry mainly
employs the on-site model of fabrication for industry
and infrastructure segments. Workshop delivery model
is prevalent in PEB and buildings segment. There are
early indicators of change in preference in the industrial segment especially for power from on-site to
workshop model
Overall, there is good potential for steel structures in
India owing to robust economic growth, increased
government spending on infrastructure and change
in mindset with regards to use of structural steel in
building and other infrastructure segments

Notes

Conference Paper on Steel Structures

15

Contacts

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India
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Email: rahulkamat@deloitte.com
Mr. Arpit Gupta
Analyst
Tel: +91 (22) 6619 8600
Email: arpitg@deloitte.com

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