C S VERMA
India retained fourth position in steel production globally in 2014, with 2.4 per cent growth over 2013, surpassing the global average. India maintained the growth rate in spite of growing imports, which may pose challenge to domestic producers in 2015, if it continues at the same pace
Steel consumption remained almost stagnant in 2014, but the industry hopes for demand revival in 2015 backed by the government’s focus on infrastructure and manufacturing, which are major drivers of steel consumption. In 2015, with 6-7 per cent production growth, India can overtake the US and jump to third position in terms of crude steel production.
Globally, the industry faced some challenges due to flat consumption growth on account of slackened demand in China, where demand growth is likely to have slowed to 3 per cent and 2.7 per cent in 2014 and 2015, respectively, from 6.1 per cent in 2013.
A slowdown in economic growth has tempered steel demand. China’s GDP growth is expected to slow to 7.3 per cent and 7.1 per cent in 2014 and 2015, respectively, from 7.7 per cent in 2013. The Chinese leadership has proposed structural reforms in the economy, shifting the emphasis from investment and export-driven growth to services and consumption-led growth.
Such transformation may negatively impact China’s steel demand in the long run. Chinese steel producers maintained production levels in 2014 by diverting material to overseas markets, which resulted in record exports of around 92 million tonnes.
India also saw a surge in steel imports from China in 2014, particularly from July onwards, and almost doubled during April-November. Among major importing countries, steel imports from Korea and Japan continued to grow, as these countries reaped benefits of Cepa with India.
Indian steel majors have ramped up capacities over the past few years. The current capacity is around 100 mt while 8-10 mt of new capacities are in the pipeline. In the public sector, SAIL has added 5 mt and RINL 3 mt to their existing capacities. Due to sluggish demand, capacity utilisation is hovering around 80 per cent. With steel consumption expected to grow in 2015, utilisation can improve, provided imports, particularly those from China, are checked. Chinese exporters are suspected to have circumvented export duties through misclassification of material, leading to a price drop in export markets, including India.
In the last quarter of 2014, Indian steel producers were forced to cut prices of long products by almost 10 per cent and on flat rolled products by 5-6 per cent due to higher imports and slow consumption. Prices may not drop further in 2015, as some of the Chinese and European mills are barely able to meet costs at current prices. But global steel prices may not rebound soon, which may prevent any potential price hike in the domestic market.
Iron ore and metallurgical coal are major inputs in steel making. Weak Chinese demand for steel has translated into weak demand for iron ore. On iron ore supply, expansion in production by majors such as Rio Tinto and BHP Billiton despite weak Chinese demand has created an oversupply situation, which is likely to result in lower iron ore prices in 2015. The price of metallurgical coal too is expected to remain subdued. With raw material prices likely to remain lower, the steel sector is hopeful of a better performance next year.
With China aggressively targeting all major export markets in 2014, India’s prospects in various markets got limited and exports slowed down.
While the industry expects to benefit from falling raw material prices, Indian steel firms need to cut costs further to remain competitive.
Hoping to benefit from the ‘make in India’ campaign, domestic steel firms hope to improve capacity utilisation in 2015. With the government’s initiatives to boost infrastructure and manufacturing, the times ahead look positive.
With the industrial push, the steel industry is likely to pick up momentum in 2015 and see better demand in the domestic market.
Source: MYdigitlife
- 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.