Indian Steel Production Rises; Consumption Falls

India’s steel production growth far outpaced the consumption during the April-December period of the current fiscal. While production grew by a whopping 8.5%; a mere 3.3% increase in consumption during the nine-month period is forcing Indian steelmakers to look for export markets to sell their excess produce.

Hoping that steel demand will pick up, particularly after the prolonged monsoon, all major producers such as SAIL, JSW and Essar Steel have been producing more steel. Production by small steel producers, which contribute more than half of country’s steel output, was also on the rise.

However, consumption has been subdued throughout the year and it worsened further after demonetization in November. Market analysts said that demand from end-use segments like construction, white-goods and automobiles is likely to remain subdued for some more time. While construction sector has been badly hit after demonetization, auto sales also fell to its 11-month low in November.

Will Indian Steel Prices Sustain:

Indian manufacturers have raised their prices on account of higher cost of production, lower imports and rising exports. But question remains whether steel prices can sustain at these levels? Indian players are banking on exports, especially after several countries have put restriction on Chinese imports. Net Sales Realization (NSR) of an Indian manufacturer for exports is lower than that of domestic market. Manufacturers may want to hold domestic prices or may increase a bit (at par with imports) in coming months and sell in export market at lower realizations to cover up volumes.

Exports Up, Imports Down:

On the expected lines, Indian steelmakers were looking up to the export market and their efforts are paying off now. During the April-December period, exports increased by 57.8% to reach at 4.98 MT.

On the other hand, thanks to government’s series of protectionist measures to safeguard the interest of the domestic industry, imports fell by 37.4% to 5.5 MT during the April-December period of the current fiscal. Analysts said if the current momentum is maintained in the remaining three months, India might end up as a net exporter of steel in the current fiscal.

India has been a net importer of steel for the last five years barring in 2013-14.

India’s steel scenario (in MT) :

(Source: JPC)