Steel Manufacturers Fear Further Drop In Demand

The Joint Plant Committee (JPC) of steel producers has estimated that domestic demand for finished steel will drop by 400,000 tonnes in the current fiscal to 24.3 million tonne against 24.7 million tonne in the previous year.

This assessment has been reinforced by the rather dismal growth in apparent consumption (apparent consumption = production + import - export + variation of stock) of finished steel, which stood at only 3 per cent in the domestic market last fiscal. Last year, the apparent consumption of steel was 22.86 million tonnes as compared to 22.26 million tonnes in 1996-97.

Since 1995-96, the growth in apparent consumption has dropped from 11 per cent to 3 per cent.

These statistics imply that the domestic steel industry will miss the targets set by the steel ministry during the ninth plan period.

According to industry analysts, most steel producers in the primary and secondary sector have had to cut production by at least 30 per cent to control inventories.

While the past year has seen majors like Steel Authority of India Ltd (SAIL) and Tata Iron & Steel Company (Tisco) posting a growth in their total steel sales, experts say that the increase was primarily due to value-additions and higher pricing of products.

Faced with this situation, the steel industry, through the JPC, has decided to ask the steel ministry to revise its projections for the ninth plan.

This was decided at a meeting of 65 representatives of the domestic steel industry in New Delhi on March 27.

The ministry, in its projections for the ninth plan, had put the domestic demand for finished steel at around 32 million tonnes. Exports have been pegged at 6 million tonnes over the same period. That the industry is likely to fall short of both targets is evident from the fact that for the financial year 1998-99, the JPC has estimated exports to touch only 2.7 million tonnes.

The last fiscal has seen the steel sector buckling under the pressure of low price realisations and increasing imports in an already stagnant market. This has been particularly aggravated by the collapse of the infrastructure and automobile sectors.

One power project means the consumption of more than a million tonne of steel. Unless the government takes an initiative in promoting fast-track infrastructure projects, domestic producers could be headed for a long spell of problems. analysts said.