Steel export demand is expected to “remain subdued” because of a global slowdown, the Economic Survey 2022-23 released on Tuesday said. However, the Centre’s thrust on infrastructure projects, pick-up in construction activities and real estate demand, and “healthy demand for automobile sector augur well” for domestic demand.

The survey pointed out that iron and steel exports moderated in the first eight months of the current fiscal “owing to a slowdown in the global economy, particularly in Europe and China,” and also due to a levy in “export duty to enhance domestic availability”.

“Yet, iron and steel exports are higher by 20 per cent over the corresponding pre-pandemic levels of FY20,” it stated adding that “export demand may remain subdued with the global slowdown” .

A report by the Ministry of Steel said, for April–December period, export of finished steel was 4.74 million tonnes (mt), down 54 per cent (almost halving); while imports increased by over 27 per cent to 4.4 mt.

India incidentally is the second largest crude steel producer in the world.

Global volatility

According to the Survey, the volatile international commodity prices and supply disruptions in raw materials “can weigh on industrial growth in the wake of new disruptions at the global level”.

The re-emergence of Covid-19 in China can trigger supply chain disruptions, it apprehended. However, if China returns to normalcy (from Covid-19), “there can be an increase in commodity demand” thereby reversing the current trend of decline in commodity prices.

“The strength and duration of the recovery in commodity prices will be a function of many factors, such as the pace of China’s economic recovery and growth outlook in North America and Europe. Notwithstanding such open questions, industrial output in India should continue to grow steadily based on resilient domestic demand,” the Survey said.

Domestic Demand

According to the survey, the steel sector’s cumulative production and consumption of finished steel at 88 mt and 86 mt, respectively, during April-December period of the fiscal. This was higher than the corresponding period when consumption and production were around 80 MT and 85 mt levels. “The growth in finished steel production is aided by double-digit growth in consumption (11 per cent on a y-o-y basis), bolstered by a pick-up in the infrastructure sector significantly driven by increased Capex of the government,” it stated.

Stable credit profiles, deleveraged balance sheet, and “robust cash accrual support” are going to support the capex of domestic steel-makers, it said.

India’s production linked incentive(PLI) scheme for manufacture of speciality steel saw 67 applications, from 30 companies that were selected, and attract a committed investment of ₹42,500 crore. The scheme aims at increasing capacity by almost 26 mt.