Mumbai: Economic think-tank Centre for Monitoring Indian Economy (CMIE) has said that the demand for steel has improved and the trend will continue in the current fiscal.
“The ongoing government funded infrastructure projects during the peak construction season, a slight revival in the automobile industry and a sharp 40-45% correction in steel prices from the peak level of July 2008 spurred the demand for the commodity,” CMIE said in its monthly review of the Indian economy.
Revival of demand, it said, would also start to reflect in prices in March, which were up 2-3% after sharply falling in the previous four months.
“While the improved demand scenario would continue in 2009-10, this would not translate into a major recovery in steel prices,” CMIE said.
Average prices of hot rolled coils rose by 1.8% in March. Prices of cold rolled coils and galvanised sheets rose by around 2% each.
“With a sharp reduction in input prices expected in the renewed contracts of domestic companies and global steel prices remaining subdued, we expect domestic steel prices to remain weak in 2009-10,” it said.
The economic think-tank expects steel output to pick up in the current fiscal backed by healthy demand from long steel products used in the infrastructure construction.
“Further, a gradual pick up in the housing construction activity in the second half of 2009-10 due to low interest rates and fall in property prices would create new demand for long products,” it said.
With fresh capacity of 4.8 million tonnes coming on stream in the current fiscal, total finished steel capacity of the industry will go up around 70 million tonnes.
“We expect finished steel production to grow by a healthy 6.5% in 2009-10 as compared to a modest 1.5% rise estimated for 2008-09,” CMIE said.