‘Pent-up demand, infra projects to keep steel offtake, price rising’

Suresh P Iyengar Mumbai | Updated on January 16, 2021

Steel demand in India has been growing steadily supported by investments from the government. However, the user industry has been complaining of high steel prices skewing their project cost calculations. The firm global prices have shut the doors on imports. In an interview to BusinessLine, VR Sharma, Managing Director, Jindal Steel and Power, shares his views on the way ahead. Excerpts:

Will the revival in steel demand sustain over the next year given the kind of uncertainty in economic growth?

Yes, domestic steel demand is rising significantly month on month, outstripping the supply by a big margin. Infrastructure projects have gain momentum post September, supporting steel demand recovery. The government is optimistic about economic growth and ramping up infrastructure projects. I am confident this will end the uncertainties buzzing around, soon. In fact, steel companies have to ramp up their production to match the rising demand.

Do you expect steel prices to flatten given the concern for the user industry?

Prices of raw materials such as iron ore, scrap, DRI (direct reduced iron), HBI (Hot Briquetted Iron) and pig iron have increased significantly in the last three months. This is because of the huge pent-up demand worldwide. The lockdown due to the Covid-19 pandemic reduced manufacturing activities in the first half of the year.

All of a sudden the demand has increased to bridge the gap. Chinese steel consumption is at its peak of about 90 million tonnes per month. This has created a shortage of steel in those countries that were importing from China. Iron ore prices are still increasing, and if this trend continuous, then the steel price may move up further.

Do you think the rise in raw material prices will sustain given the healthy demand?

The shortage of raw materials like iron ore will push up the cost of steel manufacturing. With the increasing demand along with the cost-push, steel prices will remain firm in the future.

Will steel demand from infrastructure projects continue given the government’s ability to spend?

Yes. The country has no other option but to spend on infrastructure projects. Being a developing economy, the scope for new infrastructure projects will always be bright.

Apart from government spending, private investments are also showing early signs of revival. Steel demand from infrastructure projects will continue to rise. The government is also augmenting and modernising the rail infrastructure in the country with fresh investments in metro projects in various cities, which will lead to good demand from this sector.

Is the second wave of Covid a concern?

Any pandemic or epidemic is a cause of concern for everybody in the world, but governments across the globe are working hard to save lives and simultaneously salvage the economy. The focus is more on infrastructure spending as it generates a lot of employment, and has a higher multiplier effect on the economy and GDP. In short, the world has learnt as to how to survive and sustain under such a pandemic time. I think the steel demand will further increase riding on the increased consumption owing to unlocking and government stimulus to review the economy.

Will steel exports continue given the second wave of Covid -19?

Domestic companies will give preference to meet the local demand over exports. Demand is also gearing up as governments and the private both are laying impetus on the thought of Atmanirbhar Bharat. We believe exports will likely remain at a healthy level as there is a shortage of steel in certain parts of the world. China has curtailed steel exports hence South-East Asian, Indian and CIS producers will move to fill up the gap created by China in the export market.

Published on January 16, 2021

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