Mumbai: Global research firm Macquaire has said demand for steel in India remains better placed than many other countries, but there would be pressure on margins.
“India is a rare example where the steel industry is still operating at 90% capacity utilisation and inventories are reducing,” Macquarie said in its latest report on the Indian steel sector.
“We believe India remains better placed on the demand side than many other countries, but margins are being reduced as steel prices follow global demands,” the report said.
Despite being a net importer of steel and the government having imposed a 5% import duty, Indian producers have been forced to keep in line with global prices to keep cheap imports from CIS countries uneconomical, it said.
Macquarie has downgraded global steel price forecasts by 12% for 2009 and by 16% for 2010 as demand was likely to be down 12% for 2009.
“We estimate that 50% of the global industry will be loss-making,” it said, adding that companies with lowest cost structures were likely to survive in the downturn.
For Indian companies, the major differentiator is employee costs, as the difference in spot rates for iron ore and captive iron ore has narrowed considerably, it said.