The near nightmarish steel demand scenario of the last financial year may well be fading. Growth in steel demand stood at 7.7 per cent in April, well above the average growth rate of 2011-12 — and also the growth rate in any month of the last financial year.
According to data provided by the Joint Plant Committee, the government body that tracks steel metrics in India, real consumption in April grew by 7.7 per cent over the same month of 2011-12. Demand stood at 5.6 million tonnes, against 5.2 mt in the corresponding period of last year. Steel production grew by 5.2 per cent. So, demand growth outstripped production growth in the first month of the current financial year. Though the numbers were only for April, these hinted at a positive trend for the sector in 2012-13.
Demand growth remained subdued throughout 2011-12. The sector was expecting 8-10 per cent growth, in line with growth trends of earlier years. However, the number stood at 6.8 per cent.
Sajjan Jindal, chairman and managing director of JSW Steel, said, “India’s GDP (gross domestic product) is expected to grow at 7.5 per cent this year and normally, the steel sector grows at 1-1.5 times the GDP. Therefore, with the current scenario, we are looking at a growth rate of 7.5 per cent for the steel sector, as well.”
Tata Steel’s chief financial officer, Koushik Chatterjee, said the steel sector globally was expected to grow at 6.9 per cent, though there were some signs of softening. Hence, the 7.7 per cent demand growth in April is a positive signal.
JSW Steel said, “Whilst steel demand globally is expected to be sluggish in certain parts of the world, including India, base level steel demand is expected to remain strong.”
Hemant Nerurkar, managing director of Tata Steel, echoed similar sentiments. He said, “The steel demand growth in India in 2011-12 was much below expectations of 8-10 per cent. We need an improvement in infrastructure spending from the government to boost steel demand.”
Tata Steel is positive on the demand story this year. It expects to produce one mt more steel than it did last year. JSW Steel also said in its guidance that it would produce 8.5 mt steel this year, against 7.43 mt in 2011-12.
Lead prices traded marginally lower by 0.14% to Rs 108.45 per kg in futures trade today owing to subdued demand in the spot market.