Indian steel heading for good times

Monday, 20 October 2003, 19:30 IST
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NEW DELHI: With global prices rising and demand growing in key domestic and overseas markets like China, India's steel industry is heading for "good times", according to a leading business consultant firm. "In the short to medium term, Indian steel industry appears to be heading for good times with strong domestic demand supporting the surging demand from China," states New York Stock Exchange listed Dun & Bradstreet in a sectoral update. India's domestic steel consumption, which at 27 kg per capita consumption is much below the global average of 121 kg, has been witnessing a turnaround and growing faster than the world average consumption. India's annual steel production is currently around 32.9 million tonnes. While world steel consumption witnessed 3.6 percent annual growth during 1998-2000, Indian domestic steel consumption is expected to grow at 5.5-6.5 percent in line with GDP growth, the report said. "The factor driving the demand for steel would be increased construction activity. Construction industry would be a big beneficiary of the ongoing National Highway Development Programme and focus on infrastructure sector," the report noted. In the central budget for 2003-04, India had announced plans for undertaking infrastructure projects worth 6 billion. During the current fiscal, the automobile industry has witnessed 27 percent growth in commercial vehicles and seven percent in passenger car segment. The growth in domestic demand for automobiles and increasing trend in outsourcing of auto components by global original equipment manufacturers from India is expected to boost demand for steel. Even the white goods segment is expected to show good growth with healthy demand from rural areas on account of a good monsoon, low interest rate and easy availability of retail finance, the report pointed out. On the global front, aided by international steel prices and robust growth in imports by China, India's steel exports rose 38 percent in 2002-03 to touch 4.2 million tonnes. In the first quarter of 2003-04, Chinese demand has grown nine percent, accounting for 25 percent of global demand. "The Chinese demand is expected to show strong growth in coming years, which would coincide with the peak requirement of steel for building infrastructure for Olympics 2008," the report said. "These developments should have a salubrious effect on global prices although India might not gain in terms of volume because of rising protectionism amongst key importers," it said. Both Chinese and U.S. governments are sensitive about steel imports from India crossing the three percent level. "However, strong international prices coupled with healthy domestic demand should protect the fortunes of Indian steel makers for some time to come," the report said. To meet increased demand, capacity utilisation of Indian producers is expected to improve with no major capacity additions planned in the near future, apart from Tata Steel's expansion of one million tonnes.
Source: IANS