An Edelweiss reports suggests carbon steel majors continue to gain ground
India is the second largest stainless steel producer in the world after China. According to the Ministry of Steel, the steel sector in India contributes nearly two per cent of the country’s gross domestic product (GDP). The growth in the Indian steel sector has been driven by domestic availability of raw materials, such as iron ore and cost-effective labor. Consequently, the steel sector has been a major contributor to India’s manufacturing output.
India's stainless steel production increased to 3.32 million tonnes (MT) for 2016, showing an impressive growth of about 9 percent over three million tonnes (MT) achieved in 2015. The Ministry of Steel has released National Steel Policy 2017, which encourages higher spending on infrastructure and construction through government initiatives to push steel demand and increase utilisation.
The overall steel consumption grew by 5.3 per cent to 26,309 kilo tonne (KT) on year to year basis in June 2017 and 8,826 kilo tonne (KT) during first quarter of the current fiscal year 2018.
Carbon steel consumption growth
The carbon steel consumption witnessed highest growth in the past nine months. In June 2017, it registered a growth of 7.3 per cent on year to year basis, despite a hiatus of relatively low demand growth of ~3.8 percent in May 2017.
The giant players have benefitted the most from the growth in carbon steel consumption. During April-June'17 quarter,the carbon steel consumption grew by 4.8 per cent over same period of last year, with major players growing at a much higher clip, especially Tata Steel increased by 32 percent on year to year basis.
Tata Steel (TSL) and Rashtriya Ispat Nigam Limited (RINL) have continued to gain market shares with their saleable steel production increased by 43 per cent and 29 per cent on year to year basis, respectively. However, steel production of relatively minor players has remained unchanged.
Alloy Steel Consumption
The alloy steel consumption declined 12 percent on year to year basis in June 2017and 7 percent during the first quarter of the ongoing fiscal. This has impacted the overall steel consumption. As contrary to carbon steel, about 25 per cent of domestic consumption is dependent on imports as most players still suffer from low capacity utilisation.
Additionally, saleable steel production of alloy steel players declined 6.4 per cent on year to year basis in June 2017 and 6 per cent during the quarter which ended in June 2017.
Declined net carbon steel exports
Net carbon steel exports declined to the lowest level in the past 12 months. The production and consumption growth narrowed to the lowest level in the past eight months because the base effect of imports became weaker and exports grew slowly due to the rupee appreciation.
Robust domestic demand needed
Sustained healthy steel demand growth is the key driver to sustain the supply demand equilibrium in the domestic market, further aided by recent pick up in Chinese export price. With end of avenues for import replacement and rupee appreciation impacting exports, domestic demand remains a significant key to sustain in the market.