India’s steel consumption is expected to grow by 5%-6% this year, on the back of government’s expenditure towards infrastructure and construction. With NDA being voted back to power, the focus will continue to remain on infrastructure development, CARE Ratings said in its latest Outlook for the Steel Sector in FY20.
However, finished steel production is likely to decline by 3-4% in FY20, compared to a 5.9% growth in FY19, since no major capacity is expected to come up from large players and small players are slated to maintain output growth rate at previous year’s levels, the report added. The ratings agency also said it had made a downward revision of its earlier estimate of 6-8% steel production growth made in February 2019.
Finished steel production is estimated to be in the range of 115-116 million tonnes in FY20, while consumption of finished steel is predicted to be around 102-103 million tonne in the current fiscal. In FY19, finished steel production was at 111 million tonnes, while consumption figures touched 98 million tonne due to increase in demand from infrastructure, construction, railways, consumer durables, among others.
International prices have softened somewhat in the last 6-8 months with prices declining from a higher of US$ 600 per tonne in June 2018 to US$ 520 per tonne in May 2019. However, prices at home have remained firm due to robust demand from end user segments and a slew of protectionist measures taken by the government to safeguard domestic steel sector.
In the domestic market, steel prices are likely to be supported by a stable demand outlook. Increase in international steel prices due to rising raw material costs will provide an additional support to domestic steel prices since the latter follows landed price parity, the report said.
International prices are likely to hover around US$ 525-550 per tonne mainly on account of expectations of a stable demand growth. However, if the current trend of firm iron ore prices persist, global steel prices may show upward trend due to higher input costs.