Steel demand in the first two months of this quarter had declined 1.8 per cent to 15.4 million tonnes against 15.7 mt logged in same period last year, with no hope of a meaningful recovery expected in December.
Notwithstanding the weak demand, domestic steel producers have announced moderate price hikes in November and December, taking a cue from rising international steel prices, said ICRA on Tuesday.
In the agency’s opinion, domestic steel prices are likely to remain sensitive to international steel prices in the absence of a meaningful pick-up in domestic demand in the seasonally strong fourth quarter.
In fact, steel demand has been falling in line with the GDP growth trend this fiscal, with growth declining from 6.9 per cent in the June quarter, to 3.1 per cent in the September quarter.
Jayanta Roy, Senior Vice-President, ICRA, said, given the continuing macroeconomic headwinds, domestic steel demand is likely to be less than 5 per cent in the current fiscal, against 5-6 per cent guided in August.
Steel companies are struggling with the slowdown in the auto sector and the contraction in engineering exports in the current fiscal. For carbon steel makers, too, the expected pick-up in construction demand post-monsoon has not materialised so far, he said.
Between April and November, India remained a marginal net steel exporter. During this period, steel exports grew by 33.3 per cent, while imports contracted by 5.3 per cent. Domestic hot rolled coil prices have been trading at a discount of about three per cent or $16 a tonne to the landed cost of imports from FTA (free trade countries) in the first week of December.
To maintain healthy capacity utilisation rates, flat steel producers have been tapping the global steel markets to beat the domestic slowdown.
Meanwhile, Chinese hot-rolled coil offers have increased by about $30 a tonne since November, giving domestic steel companies the headroom to hike prices by Rs 1,500 per tonne.