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Demand revival keeps steel homebound
Sumit Maitra
Abroad-based economic recovery in India is underway with business sentiments improving substantially over the recent months. Manufacturing activities is witnessing strong rebound, and the service sector is gradually stabilising.
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The recovery in automotive sector, notably in two wheelers and passenger vehicle, is better than anticipated.
Cement demand in terms of housing is showing green shoots. Cheap housing loans and the need for space is also spurring some demand. Infrastructure projects are also coming back into stream.
From June onwards, steel consumption has started reviving and as per latest data for October available with Joint Plant Committee, finished steel production in the country has crossed previous year’s level by 1 percent while steel consumption continues to be bit under pressure and has de-grown by 2 percent on year.
From August onwards, fall in steel consumption has been arrested and degrowth has started coming down, said Ranjan Bandhyopadhyay, executive secretary, Joint Plant Committee during a webinar organised by mjunction Services.
JPC has concluded a study on end-use of steel in association with rating agency CRISIL taking data from most of the stakeholders in the steel industry.
The sector is still not out of the woods though as till October, crude steel output is down by 22 percent while finished steel is lower by 18 percent from previous year’s level, he pointed out.
Steel consumption as a whole is down by 25 percent during April-October period.
The country will end up consuming 8586 million tons of steel by March, down from 100 mt consumed in FY20, Bandhyopadhyay pointed out. Rohit Sadaka, director, India Ratings and Research, said during the webinar that there could be 18-20 percent lower steel consumption in FY21 as compared to FY20 due to lower Gross Fixed Capital Formation to the extent of 26-27 percent.
Real estate and manufacturing are the two major components of GFCF and both these sectors are not witnessing any kind of growth pushing down overall percentage.
“Manufacturing sector will invest in capacity expansion only when capacity utilisation crosses 90 percent, which is currently hovering around 75-76 percent,” Sadaka said.
The End-Use study has identified five sectors from where bulk of the demand will come.
In coming days, growth of steel demand would come from sectors like housing and infrastructure sectors.
