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Current trend in steel output offers optimistic view – Mr Sushim Banerjee-The 19th China(Guangzhou)Int’l Metal
&Metallurgy Exhibition-metal exhibition
10/12/2017 steel expo-metal &metallurgy expo |
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Mr Sushim Banerjee DG of Institute of Steel Growth and Development in his personal capacity wrote for Financial Express that the first half of the current fiscal has shown a growth of 4.5% in crude steel production in India at 49.8 million tonne. On an annualised basis and assuming a normal hike in production in H2, the estimated production of crude steel in FY18 may be taken as 103 million tonne in the minimum which would imply a capacity utilization rate of around 81%.
The share of primary producers like SAIL, Tata, RINL, JSW, Essar and JSPL continues to be around 57% with balance 43% coming from SME sector. However if the reports by the associations of alloy steel and stainless steel producers are taken into consideration, the total crude steel production in the country is likely to be higher by 2 to 3 million tonne with a marginally higher share by SMEs.
However, it requires a thorough analysis of unit wise and year wise production data of alloy/SS to be made available to JPC for revising the data. It is observed that CS production in September 2017 is marginally lower than the previous month.
A comparison of Indian finished steel production with those of other countries as compiled by WSA needs a small correction to include production of seamless steel tubes and wires in case of India. This requires an extra effort, help from other stakeholders and a clear strategy to align the steel production and consumption estimates of India with WSA data.
In the current first half, the steel consumption in the country has gone up by 4.3%, contributed by non-alloy steel growth of 4.2% and alloy and SS growth of 6.2%. It may be seen that during April-August 2017, the total consumption growth of 4.4% was achieved by 5.7% growth in non-alloy segment, but was pulled down by (-) 7.7% growth in alloy and SS consumption. Thus, alloy and SS consumption has risen from a high negative to a reasonably moderate growth within a period of one month. The required changes in the previous year’s data in this segment need to be revised immediately to arrive at a correct picture of consumption growth in steel in the first half.
It is a matter of some concern to Indian steel producers that imports of finished steel at 4.3 million tonne in H1 are gradually catching up with exports at 4.9 million tonne. Out of this, while non-alloy finished steel imports at 3.2 million tonne is appreciably lower than the exports of non-alloy steel at 4.4 million tonne, the imports of alloy and SS at 1.1 million tonne is higher than exports at 0.5 million tonne.
Around 60-65% of imports fall in the categories of HRC, CRC and coated products. For the residual, there has been a high level of imports in pipes required by the oil and gas sector and electrical steel sheets, most of which (high grades CRNO > M-27and CRGO) are not available indigenously. Imports of slab, rerollable scrap and alloy/SS bars and rods are going up in the import basket. Imports of special grades and over dimensional plates are continuing. In the export basket, the prominent shares are held by HRC, wire rods, CRC, GP/GC products, billets and pipes.
It may be noted that the total value of imports comprising of total steel products, fittings, miscellaneous steel items, melting scrap, pig iron, sponge iron, HB iron and ferro alloys at INR 32,588 crore in the first 5 months of the current year marginally exceeds the total value of FE earned by exports comprising of all these commodities at INR 31,948 crore.
Globally, the CS production during January-August 2017 at 1,112 million tonne indicates a reasonably good growth of 4.9% with Chinese production at 566.4 million tonne maintaining a rising trend of 5.6% growth closely followed by India at 5.1%. There is a 3 million tonnes gap between India and Japan which is likely to be closed by March 2018. The capacity utilisation in steel at the global level currently stands at 72.2%.
One of the primary reasons for growth in steel production and higher capacity utilisation in global steel market is on account of higher realisation in EBITDA of steel manufacturers since the beginning of the current year. As subdued demand conditions in EU and the US were turned into marginal improvement phases due to higher government spending in infrastructure building, the uptick in auto and household appliances as an offshoot of higher consumer expenditure contributed to elimination of market pessimism, albeit not fully. The falling trend in steel prices was stalled and got reversed with Chinese production and consumption of steel lent its full support to the patent revival of steel industry. It was followed by domestic improvement in market sentiments in Japan (auto and high value products), South Korea (shipbuilding, auto and machinery and equipment). There was a renewed demand for steel in Turkey, Vietnam, Indonesia from higher domestic and export market.
It can be safely concluded that the sustainability of the global demand is crucial for price stability in Indian market. Although there is a forecast of falling prices in Iron Ore and Coking Coal in the coming months, the steel price level would be dependent on the real demand movement in the domestic market rand higher export efforts.
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