The Government’s effort to ease the supply of coal and iron ore will help brighten prospects for steel companies in the coming year.
Though the Supreme Court has lifted the mining ban on category ‘A’ mines in Karnataka, the production ramp-up is very slow, said sources in the industry. Moreover, the proposals to open up production in category ‘B’ mines continue to be stuck, awaiting approval from the Government.
The complete ban on iron ore mining in Goa has not only hit the steel industry, but also the State Government’s revenue. Apart from tourism, the mining industry is considered a money spinner for the Goa Government. The ban on mining in Goa and Karnataka has resulted in job loss for about 1,00,000 people, sources said.
Jayant Acharya, Director, JSW Steel, told
“The quality of iron ore currently sourced from other States is also an issue. Production cost has gone up substantially due to the poor quality of iron ore,” he said.
DEMAND OUTLOOK The recent economic slowdown has cast a gloom on the demand front, even as steel companies are fighting to secure their raw material needs.
Steel consumption in the first 11 months of the year registered a growth of a mere 1.8 per cent. In fact, demand has slowed down since the last fiscal, when it grew just 3.3 per cent to 73.3 million tonnes. Incidentally, in the case of automobile sector, which is a key indicator of steel demand, sales dipped 18 per cent in November to 1,526,438 units as against 1,858,386 units recorded in October.
Industry observers said the revival of steel demand depends on the procurement from sectors such as automobile, real estate and construction. There appears to be no immediate recovery in key steel consuming sectors, going by the meagre 1.2 per cent growth in the Index of Industrial Production between April and October, with October recording a fall of 1.8 per cent in growth.
EXPORTS LOOK UP However, the recent revival in export demand has turned out to be a major consolation for steel companies.
“We are witnessing good demand from the US and few European countries. We expect this to sustain as we target our exports to grow to 3 million tonnes from 2 million tonnes,” said Acharya.
Industrial production in the US has improved 3.2 per cent in October, while that of Japan and UK increased 4.7 per cent 3.2 per cent.