Economy

Despite soaring prices, steel demand on a high

Suresh P Iyengar Mumbai | Updated on May 13, 2021

India’s demand for the metal is expected to rebound by 19.8 per cent in 2021 (calendar year), the highest among the Top-10 consuming nations

Though the price of rolled coil steel has increased 55 per cent year-on-year, the domestic demand is set to outpace supply for the first time in FY22. According to industry estimates, demand is expected to be in the 140-150 million tonnes (mt) range, while the production is expected to be around 125 mt.

“Even after the increase in price, domestic steel is at a discount to both the landed cost of Chinese imports and the export price. Moreover, China has shut down small polluting steel plants as part of its de-carbonisation drive, cutting down supply. This has resulted in higher demand for domestic steel,” said an executive of a steel firm.

Demand to rebound

According to the World Steel Association, India’s demand for the metal is expected to rebound by 19.8 per cent in 2021 (calendar year), the highest among the Top-10 consuming nations. It said that the resumption of government projects and pent-up consumption demand will drive up India’s demand up.

TV Narendran, Managing Director, Tata Steel, recently said the domestic economy and steel demand have been improving thanks to the accommodative policies, government spending and relaxation in mobility restrictions.

India’s finished steel consumption in March was up 25 per cent at 8.81 mt. Domestic steel consumption last fiscal was down 6 per cent at 88 mt due to Covid-19. End-use demand is likely remain strong this fiscal year unless impacted by the second wave, said an India Ratings report.

On the supply side, steel companies diverting oxygen for medical purposes is expected to pull down production, which is also aiding in expanding the gap between supply and demand.

“The diversion of oxygen from industrial use to save human lives is expected to keep steel prices high at least for a few more months as demand continues to remain high,” said analysts at Brickworks Rating.

Published on May 12, 2021

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