Steel consumption to grow steadily in coming years: E&Y

Refocus on industralization, increased invsetments in infrastructure to retain demand

Despite a raw material crunch and problems including land acquisition and environmental clearances plaguing the steel sector, the country’s domestic steel consumption will continue to grow steadily in the coming years because of refocus on industrialization and stepped-up investments in infrastructure amongst others, according to a report.

“The current challenges, while posing constraints on supply side, do offer opportunities for players both local and global,” the global steel report by Ernst and Young said.

The country is too dependent on imported coking coal for production of steel. About 60-65% of the domestic coking coal requirements are met through imports as reserves available in the country have high ash content and are not suitable for the steel industry.

In 2012, India imported around 31 million tonnes coking coal and it is expected to rise over 41 million tonnes by 2015.

During the last few months, steel prices in India, which had been trading at a premium to global steel prices on account of import duties on steel, have corrected sharply. The correction could be linked to slowing end-user demand growth in the country along with oversupply in the global arena.

The outlook for steel demand in India is quite robust due to increasing demand from several sectors, including automotive, consumer durables, oil and gas, industrial machinery, real estate and infrastructure. Though there could be supply constraints in India in 2013, steel prices are likely to remain under pressure due to a steady stream of imports.

However, domestic oversupply concerns may resurface during 2014–15 when all of the new capacity becomes operational, the report added.