BackIndia’s steel demand seen growing as Modi seeks faster investment
Steel demand is expected to rise at the fastest pace in four years, benefiting top producers including Tata Steel, SAIL and JSW Steel
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Mumbai/New Delhi: India’s demand for steel, an economic growth indicator in Asia’s third-largest economy, is expected to rise at the fastest pace in four years, benefiting top producers including Tata Steel Ltd, Steel Authority of India Ltd (SAIL) and JSW Steel Ltd.
Demand may expand by about 5% this year to March, according to the average of eight estimates from industry executives, government officials and analysts surveyed by Bloomberg, from 3% in the previous year. Sales will be boosted by a possible revival in stalled projects and home and vehicle purchases after India’s central bank cut interest rates.
Higher demand for the alloy will help producers cope with a glut created by record imports, and the lowest prices in four years. India’s economic growth will surpass China’s for the first time since 1999 in the year to March, according to the International Monetary Fund (IMF).
“Lowering of interest rates will cut capital costs and push up investments," T.V. Narendran, managing director at India’s biggest producer Tata Steel, said at a conference in Mumbai on Thursday. “It should also drive consumption of homes and cars."
Reserve Bank of India (RBI) governor Raghuram Rajan lowered rates by 25 basis points each in two separate unscheduled cuts in January and March, prompting lenders to pass on benefits to consumers. The move is expected to boost demand for cars, homes and consumer durables. A wider-than-expected drop in the nation’s wholesale prices reported on Wednesday further boosted the odds of a third interest rate cut from the central bank this year.
Bank debts
About $392 billion of infrastructure projects, more than the size of Thailand’s economy, were stalled as of early March, government data show. That has left in its wake stressed bank debts that can jump to almost 13% of the total loan advances, the highest level since 2001, India Ratings forecasts.
“There are issues that need to be addressed for a sustainable rise in steel demand and tackling the debt issue at steel factories is one of them," said Rita Singh, chairperson at Mideast Integrated Steel Ltd. “We should also look at what the country’s needs are going to be and not just go on building capacities."
Prime Minister Narendra Modi is seeking the opposition’s support to enact a law that speeds up land acquisition, one of the biggest hurdles facing industrial projects.
Signs of an economic revival led Moody’s Investors Service last week to raise India’s credit outlook to positive from stable.
India is planning to triple its steel production capacity to 300 million tonnes in 10 years, steel minister Narendra Singh Tomar said.
“All the levers for a surge in steel demand are there and very soon consumption will take off, especially in building infrastructure like ports, roads and power plants," said S.K. Dey, deputy general manager at state-owned engineering consultant Mecon Ltd. “This will help in the utilization of new steel making capacities coming up." Bloomberg
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