Industry & Economy
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Steel
2008-09 a watershed year for steel
There was a sharp reduction in demand in the fiscal. The liquidity crunch negatively impacted steel investors’ sentiments, says the Survey.
Ramesh Sharma
Workers at a construction site haul up steel rods (file photo). —
Our Bureau
New Delhi, July 2 “The year 2008-09 has been a watershed year for the Indian iron and steel industry,” says the Economic Survey.
The industry has been hit hard by the spiralling cost of imported coking coal or metallurgical coke, notes the Survey.
Consumption flat
According to the provisional estimates of the Survey, consumption of total finished steel was almost flat (-01 per cent) at 52.05 mt for 2008-09 compared to the previous year.
The imports for 2008-09 of 5.72 mt were down by 18.7 per cent compared to the previous year, and exports at 3.66 mt down by 27.9 per cent.
The first half of 2008-09 had seen a rapid rise in consumption. Prices and profits of steel producers, spurred by this huge investments, were planned for capacity expansion accordingly.
However, with the onset of the global economic crisis since September 2008, there had been a subsequent fall in the international steel prices.
Domestic demand had also been impacted, in particular, by the sharp reduction in demand in some of the leading end-user segments of steel dependent on credit financing. On the supply side, the liquidity crunch negatively impacted steel investors’ sentiments, says the Survey.
On renewed demand recently, steel companies have and are considering increasing prices marginally.
The Survey notes that the annual rate of 9.2 per cent growth of crude steel production 2003-04 to 2007-08 came on the back of capacity expansion, mainly in the private sector plants, and higher utilization rates.
It also points out that despite having diversified product mix to include sophisticated value-added steel for the auto sector, heavy machinery and infrastructure, Indian steel suffers from the high ash content of locally available metallurgical coal.
Growing dependence on imported coal and delays in getting leases for iron-ore mines, and constraints in land-acquisition and transport-infrastructure were other concerns, taken note of in the Survey.
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