Slowing down of steel consumption in a weak economic
environment has made companies such as SAIL and Tata Steel to build up an inventory.
The disparity in production and consumption numbers for the
first five months of current fiscal suggest the possibility of a stock pile-up
with steel firms.
Consumption of steel from sectors such as construction,
automobile and consumer durable has seen a decline in recent months. A slowdown
in industrial production coupled with successive hikes in interest rates has
resulted in a sluggish demand.
Imports have come down and the
inventories have gone up. However, Steel companies do not disclose their inventory figures.
Reflecting the slowing consumption, imports of steel products have seen a
decline of 45 per cent.
“There won't be significant uptake in steel consumption
considering the weakening economic situation. One hasn't heard of any
significant infrastructure spending,” said an industry expert.
“Moreover,
companies that had announced capital expenditure are in final leg of
implementation, an unlikely trigger for consumption.” He added
However, the only consoling factor is that exports of steel
products have picked up. Exports grew 56.7 per cent in the April-August period
at 1.87 million tones.
But for the growth in exports and disruption in supply of
iron ore to steel units in Karnataka due to the Supreme Court ban on mining in
Bellary that hampered the production, the inventory pile-up with the industry
could have been higher.
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