India`s steel demand likely to rise by 4-5%: Indira Sec

According to Indira Securities, India's steel demand is likely to rise by 4-5 per cent this year and will touch a compounded annual growth rate (CAGR) of 15 per cent after FY17, says the report.

Photo: India Writes

Nov 14, 2014: Indira Securities' sector outlook on steel industry "Indian steel industry plays crucial role in development of nation and is considered as the backbone of civilization and the level of per capita consumption of steel is an important determinant of the socio-economic development of the country. 

The Indian steel industry is divided into primary and secondary sectors. The primary sector comprises a few large integrated steel providers producing billets, slabs and hot rolled coils. The secondary sector involves small units focused on the production of value-added products such as cold rolled coils, galvanised coils, angles, columns, beams and other re-rollers, and sponge iron units. Both sectors cater to different market segments. Companies such as Steel Authority of India  (SAIL), Rashtriya Ispat Nigam (RINL) and NMDC  are responsible for the bulk of the production in the public sector, while companies such as Tata Steel, JSW Steel and Essar Steel are some of the big names in the private sector of the Indian steel industry." 

Outlook 

"India's steel demand is likely to rise by 4-5 per cent this year and will touch a compounded annual growth rate (CAGR) of 15 per cent after FY17. With expectations of the new government's thrust on jump starting stalled projects initially followed by pushing large flagship projects, including the freight and industrial corridors, it is expected that India will begin moving back on the path of materials intensive growth by the end of this year. 

However, constraint of domestic iron ore availability, consistently large imports at concessional duty from Japan and Korea under CEPA-FTA, as well as rising imports of boron-added steel from China, and growing imbalance of global steel supply and demand remain major challenges for the Indian steel industry." 

"On the positive side, basic custom duty on the plants and equipment required for initial setup or expansion of iron ore pellets plants and iron ore beneficiation plants has been reduced to 2.5 per cent from 7.5/5 per cent. Lower coking coal prices may also benefit steel players in the industry. Moreover, domestic players' investments in expanding and upgrading manufacturing facilities are expected to reduce reliance on imports.

In addition, the entry of international players would provide benefits in terms of capital resources, technical know-how and more competitive industry dynamics", says Indira Securities research report.

Courtesy: www.moneycontrol.com