September 9: The future prospects of the Indian steel sector remain robust, despite a not-so-encouraging situation on the global steel sector front.
However, any increase in export of steel from China to India will adversely affect the former, the chairman of Steel Authority of India Limited (SAIL), C.S. Verma, told ISMW in an interview on September 9.
Verma said global capacity utilisation, which had slowly inched up to around 83% in June 2011 from a level of 73% in December 2010 came down to 79.7% in July 2011. The capacity utilisation in the regions affected by the ongoing economic crisis is likely to come down further, as they adjust their production in line with weakening demand, he added.
“As far as India is concerned, however, the picture is slightly different. Demand for steel in India, which had grown by 10.8% in FY11 was matched by 10.1% growth in production of finished steel due to capacity additions in the steel sector,” Verma said.
“Future prospects of the Indian steel sector remain robust as growth of around 9-10% per annum is expected over the next five years, based on GDP growth of 8-9%,” the chairman said.
He, however, said that geopolitical events in North Africa and the Middle East, fiscal austerity in southern Europe and the US, as well as monetary tightening in China are pulling down steel demand growth, while world crude steel production has grown by 7.6% y-o-y in H1 during calendar year 2011 as compared with world steel demand growth outlook (2011) of 5.9%.
Asked if Chinese demand for steel will taper off in the medium term, Verma said that in China, production is running at a rate which is likely to exceed 700 million tons (mt) for 2011. Beijing’s latest five-year plan includes an ambitious target to build 36 million affordable homes, he also pointed out.
“China continues to be a major influence on the world steel market. Even if Chinese demand remains strong, any surge in exports from China to India can affect our markets adversely,” the chairman added.
Source: India Steel Market Watch