India’s steel demand is in recovery mode, with normal demand levels likely to return over the next several months, said participants at a Steelmint webinar.
Maruti Suzuki, India’s largest automaker and one of the biggest domestic flat steel buyers, saw an 88% surge in July sales volume. Growth in sales was driven by people buying more small cars, partly as pent-up demand emerged after lockdown was lifted, while continued suspension of metro and local train services in cities also prompted consumers to buy cars for commuting, said Maruti Suzuki executive director Sunil Kakkar.
Rural demand for steel had largely remained intact through the year. Government stimulus will boost spending in railway, highways and energy, water pipelines, said G.L. Gupta, president (group procurement and supply chain management) Kalpataru group of companies. Demand for capital goods will also expand on the back of infrastructure spending.
Total steel demand is anticipated to reduce by 18-20% in the 2020-21 fiscal year largely due to the effect of lockdown that extended from late-March to early-May. But once lockdown was lifted in June, demand recovery has been swifter than expected in domestic markets, while buoyant exports have given a crucial source of sales for steel producers.
“There is V-shaped recovery in most industry segments,” said AMNS India chief marketing officer Ranjan Dhar. He said segments such as pipe and tubes has achieved 90-95% of normal demand, while autos achieved 80-85% while yellow goods (construction equipment) have achieved 80% of normal demand. Tractor sales have already reached normal levels.
There is gradual recovery in demand with normal levels of demand for steel producers likely by October or November, said JSW Steel executive director (sales and marketing) Vinay Shroff.
Localization may flourish
The government’s push for localization may lead to more import substitution of steel products, especially in the steel sector.
“The steel sector shouldn’t brake on expansions now,” said Kakkar. There is need for steel companies to supply more special steels, such as galvanized steel, corrosion-resistant steel and high tensile steels for the auto sector, said Kakkar. Maruti Suzuki currently imports 11% of its steel requirements, but is looking to collaborate with domestic steel producers to further increase its consumption of Indian steel products.
AMNS India is planning big investments for auto-grade steel to meet demand up to 2030 and beyond, said Garg. JSW’s Shroff also said it is geared to meet additional demand from auto-sector and will leverage its partnership with JFE Steel.
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