Home / Industry / Manufacturing /  Steel cos hope growth in new capacity will up output in H2

MUMBAI : Indian steel companies, which posted strong third-quarter earnings, expect steel production in the second half of 2022 to be supported by strong consumption growth and growth in new capacities.

Tata Steel Ltd posted a consolidated net profit of 9,589.16 crore, up 139% for the quarter ending 31 December 2021. JSW Steel Ltd saw its consolidated profit jump 69% to 4,516 crore. Jindal Steel and Power Ltd’s (JSPL’s) net profit dropped 27.2% to 1,866.08 crore on higher expenses.

Strong demand from the infrastructure and automobile sectors has brought steel consumption back to pre-covid levels, according to analysts. Steel companies have used the bull run to deleverage their balance sheets over the last two years.

“India’s steel demand has begun to improve on the back of continued economic recovery as the third wave of covid begins to ebb. Our steel deliveries in India expanded by 4% in the first nine months of the financial year along with an improvement in product mix," Tata Steel chief executive officer and managing director T.V. Narendran said in the company’s earnings statement.

India’s crude steel production improved 0.9% year-on-year (y-o-y) and 6% month-on-month (m-o-m) to 10.4 million tonnes (MT) in December 2021, according to India Ratings (Ind-Ra). During 2021, India’s crude steel output was 118.1 MT, up 17.8% y-o-y.

Global crude steel production was 158.7 MT in December 2021, 10.8% higher m-o-m but 3% lower y-o-y. Chinese crude steel production was 86.2 MT in December 2021, 24% higher m-o-m, but 6.8% lower y-o-y.

In 2022, Chinese production is likely to decrease, with the government focus of regulating steel output to reduce the environmental impact.

The infrastructure, construction, auto, real estate and pipes sectors together account for around 65% of domestic demand.

Domestic finished steel consumption in the fourth quarter of FY22 is likely to be sequentially higher with steel players typically picking up on execution and business after the monsoon season, which had partially impacted business over the third quarter, according to Ind-Ra.

“The demand pipeline is robust. Also, with the budget announcements the infrastructure sector will get a push, boosting demand for steel," said V.R. Sharma, managing director, JSPL.

In the budget, the government outlined improved spending on the infrastructure sector, which the industry believes will give a further boost to demand for the alloy. Besides an outlay of 7.5 trillion for FY23, total allocation for the highways sector has been increased to 1.99 trillion from 1.18 trillion in FY22.

Industry officials, however, think that current steel prices are high and industries and customers are awaiting a price decline. The prices in Q4FY22 are expected to be range bound because of support from domestic demand and higher coking coal prices and will be partially countered by the surge in Omicron.

Domestic hot rolled coil (HRC) prices were 63,600 per MT in mid-January 2022, down 1% on month and 15% on year. Domestic HRC prices were high in November 2021, it has faced some pressure due to a weaker domestic demand with the Omicron surge and a continual decline in global HRC prices due to a sluggish Chinese demand.

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