The New Year is likely to bring some cheer to the Indian steel and iron ore industry, which was struggling for the last couple of years owing to slowdown in economy as well as scarcity of raw material, driven by the Make in India concept and expected resolutions of issues around the mining industry.
The Make in India concept envisioned by the new government and its supporting policies is expected to provide immense potential to the market in 2015. The optimism owing to an expected resolution of issues around the mining industry and the addition of new steel making capacities has held the hopes very high for New Year.
The healthy optimism is led by the expected reopening of the mining industry in coming months. Goa and Karnataka are likely to see some activity beginning by mid-2015, if not early. Green and brown field steel expansion plans are right on track and will boost production growth by nearly 5 to 6 per cent. Issues surrounding cheaper and inferior steel imports may resolve due to higher taxes and anti-dumping duties. Export duties and restrictions on iron ore may ease as the government has planned and introduction of GST would help in easier and faster movement of finished goods within the country, analysts said.
“Raw material situation is definitely going to give advantage to steel makers. Even if the steel majors would like to import or buy domestically, the markets will offer good opportunities in 2015. Global iron ore and coal prices will remain low due to surplus availability while domestically, the situation will open up after the restrictions are pulled down by the state governments and apex court. Orissa and Jharkhand are likely to come back full force around mid-2015 and with the state government signing up MoUs with steel producers for supply of raw materials, the situation is soon going to give support to the steel parties,” said Prakash Duvvuri, head research, OreTeam.com.
Steel manufacturers like Sail, Tata Steel and JSW Steel also feel that the coming year is expected to bring back cheer in the sector with demand expected to revive.
“Forecasts indicate that the domestic economy will grow at around six per cent buoyed by a stable government at the centre, economic reforms and a turnaround in manufacturing. This is good news for the steel industry and Tata Steel will continue to service the market with innovative products and services. The scope is huge, with the Working Group on Steel for the 12th Plan projecting a crude steel capacity of 140 million tonnes by 2016-17,” TV Narendran, managing director, Tata Steel, India and South East Asia told Financial Chronicle.
The first phase of the Kalinganagar Project of three million tonnes per annum capacity will be progressively commissioned from the early part of 2015. While the emerging scenario looks positive, steelmakers in India face a challenging future in the long run, as they may not be able to add capacity to keep pace with the rising demand. The need of the hour is to steer new investments in the industry with appropriate policy support so as to ensure that production of steel matches the growth in consumption, Narendran said.
The year gone by has been challenging for the industry faced with regulatory issues and sluggish demand from major steel consuming sectors like infrastructure and automobiles.
“Tata Steel performed better than the market with increase in sale of branded products, retail sales and maximising revenue from innovative service offerings. Differentiated and value-added product offerings enabled the Company to maintain its leadership position in the market,” Narendran said.
Tata Steel was impacted by issues veering around mining lease renewals which led to intermittent stoppage of mining operations leading to disruption in the end use operations.
“Policy clarity and stability, especially with regard to renewal of mining leases and forest clearances, are imperative to ensure the growth of the steel industry. We are hopeful that the government will address the concerns of the steel industry in this regard in the New Year,” Narendran said.
India is the 4th largest producer of steel in the world and also its 3rd largest consumer. India retained its 4th position among world steel producers in 2014 with a production growth of 2.4 per cent over 2013, surpassing the global average growth of 1.8 per cent.
“This production growth was maintained in spite of growing imports which may pose a challenge to domestic producers in 2015, if continued at the current pace. Consumption of steel remained almost stagnant during the entire 2014; however, the steel sector is hopeful of a strong revival of steel demand in 2015 backed by the new government's stated emphasis on performance of infrastructure and manufacturing sectors, which are both major drivers of steel consumption. In 2015, with a production growth of 6-7 per cent, India can overtake the US and jump to 3rd position, globally, in terms of crude steel production,” said CS Verma, chairman, Steel Authority of India.
The Indian steel majors have been ramping up production capacities over the last few years. The current steel making capacity is around 100 million tonnes and 8-10 million tonnes of new capacities are in the pipeline. In public sector, SAIL has added 5 million tonnes and RINL has added 3 million tonnes to their existing capacities.
“Due to sluggish demand over last two years, capacity utilisation in the country is hovering around 80 per cent. With steel consumption expected to get a boost in 2015, capacity utilisation can improve, provided imports, particularly those from China, are checked. Chinese exporters are suspected to circumvent export duties by misclassification of material and thus drop prices in export markets including India,” Verma said adding that in the last quarter of 2014, the Indian steel producers were forced to cut prices by almost 10 per cent on long products used in construction and by 5-6 per cent on flat rolled products due to higher imports coupled with subdued domestic consumption.
“Prices are not likely to drop further in 2015, as some of the Chinese and European Mills are barely able to meet costs at the current price levels. However, the global steel prices are unlikely to rebound soon, which may prevent any potential price hike in the domestic market,” Verma said.
Seshagiri Rao, joint managing director, JSW Steel also believes that the sector will witness healthy growth in 2015 and hopes issues related to raw material will get resolved.
Analysts said that the country is on track with production but the demand growth is still dependent on the policies being implemented. While production has grown at a pace faster than the global average for a significant part of 2014, demand has been very slow and unsteady with the sector looking for a boost from the new government's stated emphasis on manufacturing and infrastructure sectors.
“The Make in India campaign is the best hope for the steel producers who are also looking to expand their capacities and provide nearly 125 million tons of crude steel strength to the country in the next fiscal. The campaign is likely to boost the country’s steel consumption potential as well in the coming years. India's per capita consumption is around one-fourth of the international average sitting close to 60 kgs and this keeps the hopes renewed for further enhancement and betterment for the country. The potential is quite strong by the government’s policies would build the path towards harnessing it,” said Duvvuri of OreTeam.com.
The government is planning a wide array of infrastructure projects which includes major and minor ports, highways, freight corridors and even construction and rural projects to boost the consumption of steel and create a robust demand going ahead, said an analyst at Prabhudas Lilladher declining to be identified.
Automobile companies are looking at better sales in 2015 after the launch of many varied models in 2014. Tax reliefs have already been proposed for hybrid and fuel efficient vehicles. The real-estate is watching the markets closely as major land reforms are likely to come up enabling a more wider opening in this sector.Hence, after the worst possible fears coming true and spoiling the spirits in 2014, the entire industry is now pinning its hopes on 2015, the analyst said.
Source:mydigitalfc.com
- metaljunction »
- Metal News
Metal News & Events
METALJUNCTION PUBLICATIONS
Coal Insights (English) Monthly
Coal Insights is a ready reckoner for anyone associated with coal. This publication is aimed at tracking everything related to coal in India.
India Coal Market Watch(English) Monthly
ICMW is a one-stop source for all news, data and research pertaining to coal demand, consumption, stocks, spot- and long-term prices with respect to the Indian Market.
India Steel Market Watch (English) Monthly
ISMW is a brand new high-end steel market report, covering all aspects of the steel industry in India.
Steel Insights(English) Monthly
Steel Insights delves into various facets of the domestic and global steel industry such as market fundamentals, raw material price trends, price forecasts etc.