Demand for higher steel grades to fuel imports in 2019: CARE Ratings

CARE report says domestic consumption may rise 5.5-7.5 per cent

The country’s import of steel is expected to rise by 2.5 to 3-5 per cent in 2019-20, fuelled by demand for special and higher grades, says CARE Ratings.

Its report says domestic consumption of steel is projected to rise between 5.5 and 7.5 per cent. “We believe consumption of long steel products will grow at a faster pace, compared to flat steel products, mainly on account of the government’s focus on infrastructure. For FY19, the government’s revised capital expenditure was higher by 20.3 per cent  to Rs 3.2 trillion on a year-on-year basis and funds of Rs 3.4 trillion have been allocated for FY20,” it adds.

Finished steel production is tipped to grow by 6-8 per cent during FY20, backed by demand from user industries such as construction and infrastructure, automobiles and consumer durables.

In FY17 and FY18, India was a net exporter of steel. This had altered in the April-November  period of FY19 (first eight months of the financial year), with finished steel import toppling export by 0.7 million tonnes. 

 According to data from the Centre for Monitoring Indian Economy, the former rose 2.2 per cent to 5.9 mt, while the latter fell 35 per cent to 5.2 mt.

Higher import from South Korea was one reason. In March 2018, the American government imposed protectionist levies of 25 per cent and 10 per cent on steel import; this led to diversion here of Korean shipments.

Hot Rolled coil, galvanised sheets and some grades of alloy steel are the bulk of our export. On an average, nine per cent of the country's production is exported, while 11 per cent of the demand was met from import in the past five years. 

The CARE report says domestic prices of steel products have been firm. Between April and December 2018, these rose by 18-33 per cent over a year before, on the back of a robust demand. 

Consumption in the comparable period grew 7.9 per cent to 71.6 mt. Prices are expected to weaken by five per cent in FY20, taking cues from those in China. A rise in domestic consumption will arrest any sharper fall, the report believes.