The marked slowdown in steel and cement demand have come as a early sign of economic slowdown even as the global economy are reeling under recessionary impact.
Steel prices have been falling steadily in last few months due to sharp rise in cheap imports. From the peak of ₹77,000 a tonne spot steel prices have fallen to 62,000 a tonne last month.
Cement demand has also been slowing down ahead of south-west monsoon season. Ultratech Cement, the country’s largest cement producer with pan-India presence, reported that its sales in June quarter was down five per cent quarter-on-quarter at 29.96 million tonne (31.65 mt) though year-on-year it was up 20 per cent largely due to capacity addition. The capacity utilisation of the company was at 90 per cent.
The IMF recently predicted that economic growth in India will decline in this fiscal to 5.9 per cent against its earlier estimate of 6.1 per cent. India growth will to be hampered with the global economy slowing in the second half of the year, it said.
Dr Narayani Ramachandran, Deputy Director, NMIMS said anecdotal evidence shows that the momentum gained in the early quarters has slowed down in the March quarter in the key infrastructure industries due to the slowing down of demand and the recovery is still a distance away.
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Hetal Gandhi, Director - Research, CRISIL Market Intelligence and Analytics said steel and cement have seen some moderation on a sequential basis in June quarter due to the seasonality effect.
Intense heat in April and May, followed by the advent of the monsoon in June, leads to a slowdown in construction activities, driving down demand on a sequential basis.
However, overall steel and cement demand has been very strong in Q1 FY24, even on a high base, mainly on the back of higher infrastructure and construction activities, she said.
Manish Chowdhury, Head of Research, Stoxbox said though there is a slowdown in the demand for steel and cement in the June quarter it will be too early to arrive at a conclusion.
Steel and cement may worsen further in the September quarter due to seasonally weak period for the construction sector. However, the infrastructure sector has the necessary tailwinds to sustain performance considering government’s thrust on improving the infrastructure, he said.