Nepal is poised to see an increase in steel demand, with more than 20 infrastructure projects of national importance relating to construction of hydropower plants, logistics corridors, airports, roads etc coming up. However, only 40-45% capacity is being utilised by the mills. The present challenge is that demand for steel for the last 4-5 has not gone beyond 1.5 mn t while capacity is around 5 mn t. Power tariffs are steep and demand for power can go up with the setting up of new mills, especially the backward integrated sponge iron mills. These facts and many more were revealed at a recent SteelMint-organised webinar on Nepal Steel Industry: Present Scenario and the Way Forward. The speakers at a panel discussion, Pradeep Kumar Shreshtha, Managing Director of the Panchakanya Group of Nepal, Anurag Sharma, Director & Business Head at Jagdamba Steels, Nepal, and Sanjay Agarwal, Joint Managing Director, Shyam Metalics and Energy Limited, India, threw light on emerging steel trends in this Himalayan kingdom.
Highlights are given below:
- Nepal’s current steel demand is at 2.5 mn t pa, an increase from around 1.4 mn t in CY’19.
- Nepal’s construction sector accounts for 10-12% of the country’s GDP.
- Nepal’s semi-finished imports are 1-1.5 mn t and finished steel imports at 1 mn t pa.
- India is a key exporter of steel products to Nepal, accounting for 95% share of total imports.
- Nepal imports 1-1.15 mn t of billets, 0.15-0.2 mn t of sponge iron, 0.3 mn t of long steel (of which wire rods account for 70%) and 0.5 mn t of flat steel annually.
- Major exporters of flat steel to Nepal are India (95%), China and Japan. HRCs account for 75%, CRCs for 15% and the remaining share is of electrical steel and galvanised steel.
- Nepal’s sponge iron imports grew to 160,000 tonnes (t) in CY’20 from 140,000 t in CY’19.
- The latest SteelMint assessment shows a slight downward correction in Nepal’s rebar prices which was mainly due to a decline in raw material, ie, imported billet prices from India, slight increase in rebar stocks at mills and subdued demand. Offers are at around NPR 80,000-82,000/t depending on major mills and smaller mills.
Pradeep Kumar Shreshtha, MD, Panchakanya Group, said that steel demand after the earthquake in 2015 surged which compelled imports of finished goods from India, given the problem in raw material imports, factory operations and infrastructural damage caused due to the natural disaster. At that time, many steel mills went for expansions, including the Panchakanya Group.
The government has opened a tender wherein steel companies can mine iron ore from Dhaubadi Iron Company Ltd. There are plans to set up an iron ore plant within the country.
Seven sponge iron mills are going for backward integration to reduce the production costs.
During Covid, Nepal’s steel industries worked at as low as 20-30% capacity. Today, only 40-45% capacity is being utilised by most mills.
Challenges include the Covid-19 impact, production of quality steel, labour availability, competitive market, unfavourable electricity costs etc. Banks’ interest rates have reduced 7-8% from 12%. Mills had to request the government to provide concessions and delay in payment to banks.
Anurag Sharma, Director & Business Head Jagdamba Steel, said the major concern is overcapacities. He added that Nepal’s TMT rebar capacity is expected to reach 30-35 lakh tonnes while flats is a market of 5.6 lakh tonnes pa. During Covid, it went down to 4.2 lakh tonnes and post-pandemic, recovered to 5.5 lakh tonnes
Prices of billets, CR and HR coils are up. Pipes are a big market in Nepal. Due to high HR coil prices, Nepal has shifted to patra. More than a lakh tonnes of patra were imported into Nepal in last fiscal and this is expected to go up, he said.
Nepal is less likely to face a shortage of electricity. With surplus power supply, new players will come into the market to utilise the extra available in the country. Keeping that in mind, lot of new sponge iron players, (around 11) are setting up furnaces. This will certainly increase the demand of sponge iron in the country.
Sponge iron import this year (ending 16 Jul’22) is expected to be not less than 5-6 lakh tonnes and next year, to be more than 1 mn t.
Billets demand in the next 2-3 years may go down with demand for sponge iron increasing.
The biggest hydropower project is 900* MW Arun- III project apart from the Karnali I and Karnali II, of 500 MW and 900 MW respectively. “These projects have been in the pipeline for 10-12 years but aren’t moving off the ground. Once these start, steel demand will improve,” he said.
Sanjay Agarwal, Joint Managing Director, Shyam Metaliks and Energy, said Nepal is huge market for India in terms of logistics and transportation. With infrastructure and hydropower projects coming up, demand for steel will certainly increase, opening export opportunities for India.
He added that oversupply or overcapacities are not a challenge for Indian exporters. “Rather, there is opportunity. With container freights and logistics costs going up, importing steel from India comes is a viable option for Nepal importers. It is a right time for Indian exporters to approach Nepal. The only drawback is Nepal’s slow recovery from Covid which might hit demand,” he said.
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