- Installed capacity to touch almost 12 mnt
- Imports to dip on global price hikes
- Demand to rise amid growth in solar energy, infra sectors
Morning Brief: India’s galvanized steel consumption is expected to rise almost 20% in financial year 2022-23 (FY23) to 8.10 million tonnes (mnt), as per SteelMint’s data. In FY22, it amounted to 6.81 mnt.
This indicates that domestic consumption has been robust so far and that the volume that would have been diverted towards exports in normal circumstances has been absorbed within the domestic market. India’s crude steel production was up 6% y-o-y to around 124 mnt in 2022, another indication that domestic consumption was moderately good in the calendar gone by. Looking at the fourth quarter (Q4FY23), mills expect to see good demand unfolding in the balance two months.
Galvanised steel is required in roofing applications. The infrastructure sector traditionally enters an active period in Q4 with year-end deadlines for projects approaching. Thus, the industry is upbeat on demand increasing by fiscal year-end.
Galvanised capacity
The installed galvanised steel capacity in the country is at almost 12 mnt. The tier-1 mills of JSW Steel (6.30 mnt), Tata Steel (1.69 mnt), AM/NS India (1.15 mnt) and SAIL (0.28 mnt) contribute the chunk of capacity.
These will enjoy a leading more than 5 mnt share in the 8 mnt that FY23 will likely end with.
In FY23, JSW Steel will probably produce 2.91 mnt, down marginally from 2.94 mnt in FY22. Tata Steel could see a slight 5% drop in production to 1.19 mnt this fiscal as against 1.25 mnt in FY22. The other major producers are AM/NS India with 0.97 mnt seen in FY22 and which may remain stable this fiscal. SAIL may see a 0.02 mnt drop this fiscal-end to 0.16 mnt from 0.18 mnt in CY22. Others will contribute the remaining almost 3 mnt.
Production to remain stable
Galvanised steel production will remain more or less stable this fiscal at 8 mnt compared to 8.13 mnt in FY22.
Imports to dip
Imports of the material are likely to fall a nominal 5% to 0.70 mnt in FY23 from 0.74 mnt in the preceding fiscal amid the fact that imports are not viable anymore in Q4. Global prices of hot rolled and other finished products have been rising amid restocking needs in Europe and also because of expected rise in domestic demand in China amid eased Covid rules and economic growth booster shots.
Exports to drop sharply
Galvanized steel exports are expected to plunge 71% in FY23, as per SteelMint’s data.
In CY22, these dropped a steep 59%. Galvanised comprised around 10% of India’s total steel exports of 10.45 mnt in CY22.
The main reason for the drop in exports is the 15% export tax which dragged down overall India’s steel exports in CY22 by 43% y-o-y.
Outlook
Galvanised steel is finding increasing applications in the solar energy space. The structure on which solar panels are mounted use galavanised material. From 2 GW capacity of cumulative installation as of FY22, the residential solar market alone is likely to touch 3.2 GW by FY23, as per the website of the Institute of Energy Economics and Financial Analysis. The Indian government’s new and simplified rooftop solar subsidy scheme has the potential to catalyse the solar residential market’s growth, the website further says. As per a Mordor Intelligence study, the Indian solar market is expected to grow at a CAGR of 8% over 2019-2028.
This bullish growth outlook will have a positive impact on India’s galvanised steel demand.
That apart, the government’s infra push, and housing sector growth will also boost galvanised consumption in the medium to long term.
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