Rising long steel demand in India, coupled with a slowdown in infrastructure and industrial capital expenditure, only indicates the shift in steel production from the unorganized to organized sector, Bank of America-Merrill Lynch (BofA-ML) said in a report released on Friday.
"Our analysis/field visits indicate rising long-steel consumption only indicates the shift in production from an unorganized to an organized sector," said BofA-ML said.
"To some extent real estate slowdown is leading to the acceleration of this process," the report added.
Noting that small steel plants - below 0.5 million tons capacity - and unorganized sector steel units are closing down, the report said "their market share is grabbed by large steel units and is reflected in increased long steel demand as reported by the Joint Plant Committee (JPC)".
"Small long steel units cannot survive as their costs are higher than sales price by 7 percent," it said.
In the context of depressed prices, the government has increased import duty on steel products by 2.5 percent.
"The status of tier-II flat steel mills and the established fact that cheap imports are causing price falls in India may lead to further import duty hike," the report said.
India's merchandise exports declined further for the seventh straight month in June to $22.29 billion, which was 15.82 percent lower than the $26.48 billion worth shipped in the same month last year, official data showed last week.
Exports remained almost static compared to May's figure of $22.34 billion, continuing the declining trend for the sixth straight month, caused by the global economic slowdown, fall in crude oil prices and appreciation of the rupee.
