Steel consumption up by 2.1% in H1 FY14, might enhance in H2

Domestic steel demand and consumption is seeing improvement since July, as per the data released by the Joint Plant Committee of Steel Ministry. During H1 FY14, apparent steel consumption in the market (production plus imports minus exports and adjusted for changes in inventories) stood at 41.1 MnT, against 40.2 MnT during the same period last year, thus registering a growth of 2.1%.

This is the highest growth in steel consumption recorded this year and is up from the 1.8% year-on-year growth recorded during April-August 2013 and 0.6% for the period April to July 2013. The apparent steel consumption was -0.6% in Q1 FY14, as compared to Q1 FY13.

This becomes even more prominent when only the y-o-y September figures are considered. In September 2013, steel consumption grew by 3.85% to 6.9 MnT, against 6.6 MnT in September 2012.

During the festival season, the demand for white goods such as refrigerators, washing machines, microwave ovens and automobiles rise significantly. These products require flat steel as the primary metal and hence demand for flat steel rises.

Similarly, long products — the second category of steel — is a mainstay of construction and infrastructure projects and a boost to these sectors translate into demand for longs. Companies such as JSW Steel, Tata Steel and Essar Steel are the major producers of flat products while Sail (produces both) and RINL are the major producers of longs although each has exposure to the categories in some proportion.

Analysts expect flat steel companies to see better growth in the second half due to the festive season while long product producers are still waiting for the government's promised push to the infrastructure sector. The 1.1 lakh crore of infrastructure projects cleared by the government in August is still to translate into concrete orders for the steel industry.

India, with a production capacity of 78 MnT, is the world's fourth-biggest steel producer after China, the US and Japan but its per capita consumption is the lowest amongst the four. India consumes almost 55 kgs of steel person while China consumes 500 kgs approximately and the world stands at a per capita of 215 kg. In fact, analysts say India's per capita number is in fact a few kilos less than what it used to be during the boom days of steel in 2009-10.

Sourced