'Improved demand for steel to continue'

The economic think-tank, Centre for Monitoring Indian Economy (CMIE), has said the demand for steel has improved and the trend will continue in the present financial year.

“The ongoing government-funded infrastructure projects during the peak construction season, a slight revival in the automobile industry and a sharp 40-45 per cent correction in the steel prices from the peak of July 2008 spurred the demand for the commodity,” the CMIE said in its monthly review of the Indian economy.

Revival of demand, it said, would start reflecting in the prices, which were up 2-3 per cent in March after falling sharply in the previous four months.

 

“While the improved demand scenario would continue in 2009-10, this would not translate into a major recovery in the steel prices,” CMIE said.

The average price of hot rolled coils rose 1.8 per cent in March. Similarly, the price of cold-rolled coils and galvanised sheets rose around 2 per cent each.

“With a sharp reduction in input prices expected in the renewed contracts of domestic companies, and the global steel prices remaining subdued, we expect the domestic steel prices to remain weak in 2009-10,” it said.

The economic think-tank expects steel output to pick up in the current financial year backed by healthy demand from long steel products used in the infrastructure and construction sectors.

“Further, a gradual pick-up in the housing construction activity in the second half of 2009-10, due to low interest rates and fall in property prices, would create new demand for long products,” it said.

With a fresh capacity of 4.8 million tonnes coming on stream in the current financial year, the total finished steel capacity of the industry will go up to around 70 million tonnes.

“We expect the finished steel production to grow by a healthy 6.5 per cent in 2009-10 as compared to a modest 1.5 per cent rise estimated for 2008-09,” the CMIE said.