Steel
demand in India appears to have touched a new low in
the past few months as slower offtake from the consumer durables and auto
sector has pushed up inventory at steel companies.
“Inventory
levels have risen to 45 days compared to an average inventory position of 15
days,” said union steel secretary DRS Choudhary on the sidelines of 46th
annual conference of World Steel Association.
Steel Authority of India Ltd, the country's
largest steel company, has seen inventory levels jump to 10 lakh tonnes by
September end, compared with 4 lakh tonnes as on March 31, 2012, said a senior
steel ministry official who did not want to be identified.
However, the
official claimed that the steel companies are not
planning any production cuts and that they were optimistic about a pick up in
demand soon.
But prices of the
metal have been falling. “Domestic steel
prices are down 5% quarter-on-quarter versus 1QFY13e
and should correct further due to weak demand, inventory build-up and rising
threat of imports,” analyst Bhaskar N Basu of Bank of AmericaMerrill Lynch said in a recent report.
“Low domestic
demand in flat steels used in consumer goods coupled with addition of new
capacity has led to a sharp build up in inventory,” said a metals sector analyst
with a leading Mumbai-based brokerage house who did not want to be identified.
“While JSW Steel, Tata Steel and Essar Steel have added new capacity, growing imports from
Korea and Japan have also added to higher steel supplies.”
However, for
companies like Essar Steel that mainly produces tailor-made and customised flat
steel products against specific orders, the inventory levels are much lower.
“Most of our production is against orders since we focus on value-added
products. Hence, we do not carry inventory of finished products,” an Essar
Steel spokesperson said.
Source: Economic Times
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