 "Steel imports remain a cause for concern")
Agencies making growth forecasts for a sector leave room for periodic revisions, as any major development has a bearing on the outlook. This has been manifested in the case of the global steel industry since the outbreak of a recession in 2007-08. As it had been for China for long, in India, too, that annual demand rise for steel would stay a few percentage points ahead of growth in gross domestic product (GDP) became conventional wisdom.
This, however, is no longer the case. The International Monetary Fund says India's growth was 4.4 per cent in 2013-14, helped principally by a good monsoon. Our Central Statistics Office showed slightly higher growth of 4.9 per cent for that year. The World Steel Association (WSA) found growth in India's steel use in 2013 at a disappointing 1.8 per cent. A report by the steel ministry's joint plant committee (JPC) paints an even more dismal picture of demand - it found Indian steel consumption grew only 0.6 per cent to 73.93 million tonnes (mt) in the year ended March this year. The JPC says this couldn't have been otherwise, as the "base level demand condition continued to be weak".
The economic slowdown took a toll on the construction sector, which accounts for about 60 per cent of steel demand, as also on the automobile sector, which contributes 15 per cent share to steel consumption. Industrial production recorded 1.9 per cent contraction in February, pulled down by a 3.7 per cent decline in manufacturing, which accounts for 75 per cent of the Index of Industrial Production. The manufacturing sector's output contracted 0.7 per cent between April 2013 and February 2014. This had a significant impact on steel demand. In its short-range world steel prospects report, WSA says "due to an improved outlook for the construction and manufacturing sectors" and despite lingering "high inflation and structural" issues, Indian steel demand is expected to grow 3.3 per cent this year. It adds steel demand will rise 4.5 per cent in 2015, provided the new government carries out structural reforms.
In a market bereft of life, steelmakers have seen some relief from a combination of falls in metallurgical coal prices and appreciation in the rupee. Improved supplies from the US, Canada, Australia, Russia and China have lowered met coal prices from about $300 a tonne in 2009 to about $110 a tonne. Availing of the low prices, India raised met coal imports 18 per cent to 33.1 mt in 2013-14. More than low iron ore and coal prices, what steelmakers, long subject to a bad market, need is an improvement in demand for their products. Verma says for that to happen, the new government at the Centre will have to give a fresh direction to the economy.
As our steel industry flounders, we should take note of WSA's observations about uninspiring steel demand in China and Japan. We know how aggressive a steel exporter South Korea has become of late. In fact, steel producers in the US are piqued by South Korea selling oil country tubular goods at prices well below their fair value. They have lodged complaints with the commerce department about dumping of steel products by South Korea. During the quarter ended March this year, South Korea raised steel production 5.2 per cent to 17.448 mt. This added to the glut in steel supply, as the country's frontline segments such as construction and shipping remained recession-bound. South Korea's export compulsion is, therefore, understandable. At 64.6 mt, Japan is set to record one per cent contraction in steel demand this year. WSA says growth in steel demand in China will be three per cent at 721.2 mt, against 6.1 per cent in 2013, as Beijing finally takes heed of a "red-light warning against the model of inefficient and blind development". In India, all the three countries see an important destination for their surplus steel. Taking advantage of comprehensive economic partnership agreements, Japan and South Korea have left China behind as major suppliers of steel to India.
This, however, is no longer the case. The International Monetary Fund says India's growth was 4.4 per cent in 2013-14, helped principally by a good monsoon. Our Central Statistics Office showed slightly higher growth of 4.9 per cent for that year. The World Steel Association (WSA) found growth in India's steel use in 2013 at a disappointing 1.8 per cent. A report by the steel ministry's joint plant committee (JPC) paints an even more dismal picture of demand - it found Indian steel consumption grew only 0.6 per cent to 73.93 million tonnes (mt) in the year ended March this year. The JPC says this couldn't have been otherwise, as the "base level demand condition continued to be weak".
The economic slowdown took a toll on the construction sector, which accounts for about 60 per cent of steel demand, as also on the automobile sector, which contributes 15 per cent share to steel consumption. Industrial production recorded 1.9 per cent contraction in February, pulled down by a 3.7 per cent decline in manufacturing, which accounts for 75 per cent of the Index of Industrial Production. The manufacturing sector's output contracted 0.7 per cent between April 2013 and February 2014. This had a significant impact on steel demand. In its short-range world steel prospects report, WSA says "due to an improved outlook for the construction and manufacturing sectors" and despite lingering "high inflation and structural" issues, Indian steel demand is expected to grow 3.3 per cent this year. It adds steel demand will rise 4.5 per cent in 2015, provided the new government carries out structural reforms.
In a market bereft of life, steelmakers have seen some relief from a combination of falls in metallurgical coal prices and appreciation in the rupee. Improved supplies from the US, Canada, Australia, Russia and China have lowered met coal prices from about $300 a tonne in 2009 to about $110 a tonne. Availing of the low prices, India raised met coal imports 18 per cent to 33.1 mt in 2013-14. More than low iron ore and coal prices, what steelmakers, long subject to a bad market, need is an improvement in demand for their products. Verma says for that to happen, the new government at the Centre will have to give a fresh direction to the economy.
As our steel industry flounders, we should take note of WSA's observations about uninspiring steel demand in China and Japan. We know how aggressive a steel exporter South Korea has become of late. In fact, steel producers in the US are piqued by South Korea selling oil country tubular goods at prices well below their fair value. They have lodged complaints with the commerce department about dumping of steel products by South Korea. During the quarter ended March this year, South Korea raised steel production 5.2 per cent to 17.448 mt. This added to the glut in steel supply, as the country's frontline segments such as construction and shipping remained recession-bound. South Korea's export compulsion is, therefore, understandable. At 64.6 mt, Japan is set to record one per cent contraction in steel demand this year. WSA says growth in steel demand in China will be three per cent at 721.2 mt, against 6.1 per cent in 2013, as Beijing finally takes heed of a "red-light warning against the model of inefficient and blind development". In India, all the three countries see an important destination for their surplus steel. Taking advantage of comprehensive economic partnership agreements, Japan and South Korea have left China behind as major suppliers of steel to India.