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Capacity utilisation of domestic steel industry is expected to pick up by about 5% in the current financial year on the back of protective measures laid down for producers to shield them from cheap imports and also because of a likely rise in demand for the commodity October onwards.
“Demand is expected to be a mixed bag coming from both flat as well as we long products division and since monsoons have been good, rural consumption for steel is expected to spurt in coming months taking capacity utilisations higher than last year,” said Sanak Mishra, secretary general and executive head of Indian Steel Association.
In the year ended March, domestic steel industry’s average capacity utilisation stood at 75%. At present, domestic steel industry which has been bleaquered with cheap imports is getting protection from anti-dumping duty on hot and colled-rolled products with minimum import price levied mainly on long products of steel.
“Demand for flat steel products has already been doing since last few months, we expect demand for long products to pick up in coming months as construction activity will pick up once monsoons end,” said Jayant Acharya, director commercial at JSW Steel.
Long steel products are used in construction and infrastructure industry, while flat products find wide application in automobile industry.
Meanwhile, steel producers were of the view that though imports have declined since several measures the government has brought in place to help the industry, overall demand pattern in Jul-Sep is seen largely the same as it was in the corresponding period last year in the absence of any fresh consumption.
“The market size of domestic steel producers has improved after the trade measures came and hence volumes have picked up but since demand overall has remained stagnant realisations have not picked up,” said Acharya of JSW Steel.
Essar Steel had a similar view to share.
“Year-on-year there is not much change in the demand pattern. The demand growth is almost flat. This is clearly reflected in lower GDP growth. However, flat steel production is up by approximately 6% necessitating higher exports. Exports are up by 12% in Apr-July period in this year compared to last year,” said Vikram Amin, executive director (strategy & business development), Essar Steel.
Domestic steel producers have raised product prices in August as well as in September but analysts are of the view that higher raw material costs will not allow companies to benefit from price increase. Rise in rail freight for coal is also expected to hurt steel companies.
“The price revision in products reflects the inching up of cost curve as coking coal and iron ore prices have moved up. Due to this, domestic steel companies may continue to see volume growth but realisations could move up only marginally on year-on-year in the Jul-Sep quarter,” said Ritesh Shah, senior analyst with Investec Securities.
Tata Steel, Bhushan Steel, state-owned Steel Authority of India, Jindal Steel & Power and Rashtriya Ispat Nigam are among the top integrated steel producers in the country.
During April-July, crude steel production was 31.825 million tonne, up 5% over same period of last year, imports on the other hand were down 34% to 2.39 million tonne. Consumption of steel in the domestic industry was just a tad up by 0.5% at 26.18 million tonne on year-on-year basis, according to Joint Plant Committee data.
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- [Editor:sunzhichao]
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