Steel demand on a good start
Steel demand has moved up a few notches in recent months. April and May have collectively seen an 8.5% increase in steel consumption over a year ago. There was no low base effect, as FY17 April and May saw output rise by 4.2%.
The strength of domestic demand meant that even as steel output rose by 6.1%, exports declined as producers found buyers at home. Steel producers benefit more from selling locally, earning more relative to exports. Imports actually rose by 14.8% in these two months.
Rising demand does not seem a one-off phenomenon. The last quarter of FY18 too saw a step-up in demand, taking full-year demand growth to 7.9%. Demand growth in the first nine months was a relatively low 5.2%.
Sector-wise consumption of steel in India shows construction and infrastructure having just under a two-thirds share, with engineering and fabrication a fifth, automotive at above 10%, and the rest from other sectors. Construction and infrastructure is vital for steel demand.
The government’s thrust on infrastructure projects and rising consumer spending (consumer durables and automobiles) are likely to contribute to domestic steel demand of 6-7% in the medium term.