India may post solid steel demand, sustainability an issue: Report

India is likely to report "solid growth" in steel demand for financial year (FY) 2016-17, but sustainability remains uncertain as investments in the sector are mainly government driven, World Steel Association said.

Continued high growth in the world's third largest steel producer and ASEAN countries is aiding in a stabilisation of the emerging economies, which have been hit by low commodity prices and geopolitical conflicts, World Steel Association (WSA) said.

"Indian steel demand is expected to report solid growth in FY17 backed by consumption-boosting reforms and infrastructure investment, but its sustainability is under question as key levels of investment are being provided by the government while private investment remains weak," it said.

In ASEAN countries, benefiting from stable macroeconomic policies, construction will continue to drive strong steel demand growth, WSA added.

Steel demand in emerging and developing (excluding China) economies is expected to expand by 2 per cent in 2016 and 4 per cent in 2017.

Globally, WSA forecasts demand to increase by a mere 0.2 per cent to 1,501 million tonnes (MT) in 2016, following a contraction of 3 per cent in 2015.

In 2017, it is expected that global steel demand will grow by 0.5 per cent and will reach 1,510 MT, it added.

"Steel industry environment remains challenging with escalated uncertainties driven by geopolitical situations in various parts of the world. Recently, the UK referendum outcome has further raised uncertainty on the long-awaited recovery of investment in the EU," Chairman of WSA Economics Committee T V Narendran said.

Weakness in investment globally continues to hold back a stronger steel demand recovery. However, a better than expected forecast for China, along with continued growth in emerging economies, will help the global steel industry to move back to a positive growth path for 2016 and onwards, he added.

"We expect this slight growth momentum to remain weak for the time being due to the continued rebalancing in China and weak recovery in the developed economies," Narendran said.

On a positive note, he said steel demand in the emerging and developing economies excluding China is expected to accelerate, thanks to the resilient emerging Asian countries and stabilisation of commodity prices.