A glaring mismatch between the steel demand and production continues in India. According to the data provided by the Joint Plant Committee, the government body that tracks steel metrics in India, steel production in the first six months of the year grew by 9.3 per cent whereas demand rose by a mere 1.8 per cent.
The period of April-September saw the country producing a total of 34.79 million tonne (mt) of steel as against 31.82 mt in the same period last year. The real consumption remained at 33.7 mt versus 33.1 mt last year, clocking a growth of a mere 1.8 per cent. However, when compared on a month-on-month basis, the steel production in the month of September was recorded at 5.73 mt as against 6.43 million tonne in August. The consumption, too, fell from 5.89 mt to 5.65 mt. An analyst tracking the steel sector said, “The steel production is impacted because of the iron ore situation in Bellary [Karnataka] and that is now showing in the numbers.”
JSW Steel, which operates a 10 million tonne steel plant in Bellary, cut down its production to 80 per cent capacity in September due to the shortage and later brought it further down to 30 per cent. Many other steel plants in the region have also resorted to production cuts or complete shutdowns.
SAIL, Tata Steel and RINL —the three major steel makers in India -- together posted a production growth of 2.9 per cent with Tata Steel topping the chart with 11.1 per cent growth in the first six months. RINL’s production slipped by 5. 5 per cent whereas SAIL managed a dismal 1.1 per cent growth.
On October 14, Tata Steel said it sold 3.2 million tonne steel in the first half of the current fiscal as against 3.06 mt in the same period last year.
Another analyst said the steel companies normally sold more steel during the second half of the year. “That will be the case even this year, but as the economic sentiment is going down we don't expect them to sell close to the numbers of last year,” he told Business Standard.
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The steel sector in India has been expecting a growth of 8-10 per cent per year. As far as the production is concerned, the sector has managed to grow at a healthy rate but the sub 2 per cent demand growth for the first half of the year definitely casts a shadow.
Finance minister Pranab Mukherjee on Wednesday admitted that most observers are expecting the country’s growth to go down to below 8 per cent. “In this climate, even if India’s growth rate this year goes down to below our earlier expectation, we will still be among the 10 or so fastest growing nations in the world,” he told a conference here.
The auto sector, for example, is seeing a slowdown in growth. According to the Society of Indian Automobile Manufacturers, the auto sales in the first six months of the current fiscal grew by 14.36 per cent as against 27.32 per cent in the same period last year.