Japan earth-quake: – What it holds for the Indian Steel industry.

Wednesday, April 13,

Recent news flow from Japan has lead to a change in sentiment form Indian steel mill owners. Mill owners are bullish as they foresee a huge demand for steel products coming form Japan.* Is there a real opportunity in the carnage or it is unwarranted bullishness on the manufacturers part.

Firstly let’s look at the no.’s Japan is the world’s second largest steel exporter in the world with net exports of over 30mn tones of steel. This gives enough head room for the Japanese steel producers to withhold exports and concentrate on local demand. More over the government has asked the Japanese steel producers to not to exports steel products and give preference to the domestic demand first.

China has capacity of over 600mn tones with local Chinese demand is pegged at 500mn tones/yr leaving them with over 100mn tones than it can easily divert to Japan due to demographic proximity.

India has issues of its own as a nation India still is a net importer of steel and still is technologically not as competent as our Japanese or European counterparts. Even if some incremental demand comes through from Japan the focal point should be how much of that demand will translate in to export orders for local producers. To this day none of the major steel manufacturers are operating at full capacity; this gives them a growth lever and will make them the first beneficiary of any export order that will come through to India.

While people are still accessing the damage the quakes and the tsunami caused, also it might take some analysis and time before actual extent of the damage can be quantified. Major sea ports are disrupted business activities are at very low levels. While tremors continue to rock Japan it might be some time before things stabilize and Japanese buyers come back to the market.

Does this mean that local players will not benefit at all? Not exactly, as local players will definitely benefit from the excess demand created by this calamity, and with steel majors concentrating on the Japanese markets it will allow the remaining manufacturers to strengthen there position in the Indian domestic market.