With increasing demand from automobiles, railways, defence and highway sectors, domestic steel sector is likely to see a growth of 6-8 per cent in the coming few years, says a report.
"On the back of strong growth expected in Architectural, Building and Construction (ABC) segment and Automobiles, Railways and Transport (ART), defence, highway segment, we expect demand growth (in the steel market) in the country to remain steady at 6-8 per cent CAGR during next few years," SBI Research said in its Ecowrap report.
The global steel market is expected to grow at a moderate pace in medium term (3 years) at a compounded annual growth rate (CAGR) of 2.5-2.7 per cent and mainly driven by the automotive, infrastructure and construction, mechanical machinery, electrical equipment and appliances industries, it said.
China has recently announced to trim the size of its loss-making steel industry and will close between 100 million and 150 million metric tonnes (from its existing capacity of 1,200 MT) of annual crude steel production.
"This will act as a positive enabler for domestic manufacturers," the report said.
Keeping in view the present macroeconomic conditions, performance of the sector financials, integrated steel producers are somehow better placed than secondary producers and intermediaries, it said.
Earlier this month, the government had imposed a minimum import price (MIP) for 173 HS codes iron and steel products between USD 341 to USD 752 per tonne for six months.
"With the introduction of MIP, large integrated steel players will be benefited by way of increase in price but what is also cause of concern is the formation of strict mechanism to check over invoicing to counter the MIP," it noted.
The report further noted that government should look into the possibility of setting up a funding agency for the steel sector, as well, on the same lines as PFC or REC for the power sector.
The industry will be requiring more than Rs 10 lakh crore to raise its capacity to 300 MTPA by 2025.
