India’s domestic steel demand to improve from Q2 : Care Ratings

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Biznextindia : India’s domestic steel demand is expected to be lower in the first quarter of 2021-22, but would pick up in the 2nd quarter with unlocking of restrictions, according to a report by Care Ratings.

“Domestic demand for steel had picked up pace in the second half of FY21 however the second wave of coronavirus has mildly hit demand from certain sectors. We expect domestic demand to be lower in the Q1FY22 however in Q2 demand is expected to return with unlocking of restrictions. Capacity utilisation rate of user industries will start to improve as more people get vaccinated and return to work in the coming months thereby pushing steel demand. Steel producers are likely to cover up the lost production in the subsequent months and therefore there is no change in our annual crude steel output forecast of 9-11% growth for FY22” said care ratings.

Meanwhile, Domestic steel prices continue to remain at least at 15-20% discount to the international steel prices. This coupled with fall in domestic demand gave impetus to exports from India. Localised lockdown has also slowed down construction activities. To offset the slowdown in domestic demand steel companies have increased exports during the month.

Steel Production

India’s crude and finished steel production as well as consumption of finished steel during May 2021 was significantly higher than the corresponding month of last year due to low base effect, but was lower than those during earlier years.

India’s Crude steel production at 8.5 million tonnes (mt) was 36% higher in May 2021 than in May 2020 but was 11% lower compared with May 2019. Finished steel production stood at 7.8 mt in May 2021 higher than 5.5 mt in May 2020 and lower than 9 mt in May 2019. Consumption of finished steel rose by 52% yoy in May 2021 but when compared with May 2019 was down 17%.

On a month on month basis, steel production showed marginal improvement after falling sharply in April 2021 due to localised lockdowns and diversion of oxygen for medical purposes

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