Steel consumption outpaces cement in Feb'13

Steel imports at 0.6 MT were 21% lower than those in Jan'13, lowest in one year

While the cement demand continues to struggle and analysts expect the Cement sectors February’13 sales declining 5-6% over February’12, the Steel consumption figures surprised positively.

As per J P Morgan research the implied monthly steel consumption for Feb-13 stood at 6.8 MT and was up both over February’12 as well as over January’13 (adjusted days basis).

With the increase in consumption the companies have been able to push some price increases too particularly in the long products segment.

What brings more respite and benefits to the domestic manufacturers is the fact that imports of steel products too remained lower.

The steel imports at 0.6 MT were 21% lower than those in January’13. Incidentally this is the lowest in one year.

Analysts at J P Morgan view this as a combination of specific one off reasons and also the drivers of demand for both the sectors. The one off factors include national strike and railway freight movement impacted by holy festival (Maha-Kumbh).

However, the bigger factor behind the difference is the impact of government spending. Analysts add that the cement demand is more susceptible to changes in Government spending (roads, irrigation) compared to steel (which is more of an industrial commodity and equally dependent on manufacturing/Industrial production as it is on construction).

Also the steel demand could have been pushed as many steel companies have memorandum-of-understanding (MoUs) with customers with volume commitment and hence would need to get fulfilled in the Financial Year.

Thus moving forward it still needs to be seen whether the steel demand will be sustainable as Auto demand is slowing and the economy has also slowed down considerably. However the boost to demand can come with Elections approaching fast. If government goes with its planned spending, the demand boost can be seen affecting the demand positively.