In 2013-14, steel demand in India is expected to be higher at around seven per cent, says H.M. Nerurkar, Managing Director, Tata Steel.
“Reforms announced by the Government will provide a fillip to growth in the economy. With the general expectation of modest growth globally and sustained raw material prices, we expect steel prices to firm up and be stable in the year ahead,” he told Business Line .
In the financial year 2012-13, growth in domestic steel demand is expected be around five-and-a-half per cent.
Total demand is expected to be around 75 million tonnes (mt), up from 71 mt in 2011-12.
Tata Steel is one of the leading global steel makers with an annual crude steel capacity of about 28 mt a year. It has operations in 26 countries and commercial presence in nearly 50 countries.
The group reported a turnover of $26.13 billion (Rs 143,715 crore) in 2011-2012.
“The formation of the Cabinet Committee on Infrastructure for single window clearance for mega projects will generate activity in the power and road sectors,” said the Managing Director indicating they would be the reasons to push steel demand.
In addition, Nerurkar said the expected lowering of interest rates by Reserve Bank of India in January will provide impetus to the manufacturing and consumer durables sectors.
The full impact of all these will be felt in 2013-14.
Global economic impact
The United States’ economy showing signs of growth in the long-term augurs well for steel makers.
This is because the US is the largest importer of steel. Industry watchers also expect a modest two-and-a-half per cent growth in Europe, against the backdrop of negative growth this year.
China continues to struggle with overcapacity and sluggish demand.
The main factors impacting growth in India are the inflationary pressure, the fiscal deficit, lower demand from consuming sectors such as automotive, construction, capital goods and consumer durables, and, the problem of capital inflow, said Nerurkar.
“There are delays in obtaining clearances, especially environmental clearances, land acquisition, overdue reforms,” he added.
At the same time, demand for finished products such as cold rolled, galvanised and automotive steels is expected to go up.
With banks relaxing lending norms for the real estate sector, the demand for long products will also improve.
SAIL chief upbeat
India is registering relatively five times higher growth in steel production when compared globally.
“India is the demand centre,” said Chandra Shekhar Verma, Chairman, SAIL.
“If we go by the data, in the first 10 months this year (January-October 2012) global steel growth is only 0.7 per cent. In India, the growth is 3.8 per cent,” Verma told Business Line .
Verma said that domestic steel makers are not deferring capital expenditure plans for expansion or modernisation in both private and public sector.
Talking about the outlook, Verma is of the view that growth in steel sector would be 1.2 times than GDP.
“If GDP grows at 5-6 per cent, steel growth has to be 6-7 per cent. The remaining part of the financial year, the growth should not be less than six per cent,” the Chairman said.