The country’s finished steel production is projected to grow by six to eight per cent in this fiscal, aided by spike in demand from key user industries like construction, infrastructure and automobiles.
During April-September 2018, finished steel output expanded by six per cent to 53.9 million tonnes (mt) while consumption rose at an even higher pace of 7.8 per cent to reach 47.7 mt during this period. In the corresponding period of FY18, steel production had inched up by only 2.5 per cent to 50.8 mt though consumption moved up faster by 7.6 per cent to 44.2 mt.
Ratings agency CARE Ratings feels the upward trend in production and consumption is expected to continue through the rest of this fiscal. Crude steel production in FY18 reached an all-time high of 102.34 million tonnes (mt), increasing 4.5 per cent year-on-year (y-o-y). A forecast by the World Steel Association projects Indian steel demand to grow 5.5 per cent in calendar 2018 to 92 mt and six per cent in 2019 to touch 97.5 mt. By 2019, India is also poised to dislodge USA as the second largest steel consumer, the association predicted.
Domestic steel prices were firm during April-September 2018. Average domestic prices of cold rolled (CR) coils, hot rolled (HR) coils and TMT bars increased in the range of 27-29 per cent year-on-year (y-o-y) during the period under review. Prices of CR coils, HR coils and TMT bars averaged at Rs 61550, Rs 55716 and Rs 49139 per tonne respectively. On a comparative note, finished steel products prices had spiked by 15-20 per cent y-o-y during April-September 2017.
Firm price increases of finished steel products during this fiscal were supported by growth in domestic demand and escalation in input costs. Iron ore, an essential ingredient in steel making, registered 40.7 per cent average rise in prices during April-July, primarily backed by higher demand in the domestic market. Imported coking coal (of Australian origin) prices firmed up by 5.7 per cent y-o-y to average at $197.5 per tonne during April-August.
CARE Ratings forecasts that a strong demand from the end user industries will keep steel prices buoyant during October-March of this financial year. However, there is a caveat- steel prices in India could be swayed by the demand-supply situation in China, the world’s largest steel producer. Demand for steel inside China is usually weak during winters as construction activity slows down. Weak sentiment in China is expected to mellow international steel prices. On the supply side, China is expected to undertake certain production cuts to curb pollution emissions which may sober international prices.