Active Stocks
Mon Apr 15 2024 15:59:36
  1. Tata Steel share price
  2. 160.90 -1.59%
  1. ITC share price
  2. 425.90 -0.98%
  1. State Bank Of India share price
  2. 757.75 -1.17%
  1. ICICI Bank share price
  2. 1,078.80 -2.30%
  1. NTPC share price
  2. 361.35 -0.08%
Business News/ Industry / The silver lining in slowing domestic demand for steel: higher exports
BackBack

The silver lining in slowing domestic demand for steel: higher exports

But experts and industry executives are divided on whether India could return to being a net exporter of steel as domestic demand dampens in the runup to and during the national election

In FY24, India was a net exporter of steel till October, and started to turn a net importer from the following month. Premium
In FY24, India was a net exporter of steel till October, and started to turn a net importer from the following month.

NEW DELHI : India’s steel exports are likely to maintain their upward trajectory through the ongoing first fiscal quarter as the election season has softened domestic demand for the alloy.

Some analysts predict India will shortly return to being a net exporter of steel owing to a deceleration in domestic demand in the runup to the national election. Governments are barred from making major announcements or decisions that could influence voting during election season, which effectively cuts government spending on infrastructure and other construction activity.

The election begins this month and stretches on till June.

In February, India's steel exports surged by more than 21% over the preceding month to reach one million tonnes. Despite this, the country was a net importer of the alloy at 0.9 mt during the first 11 months of FY24 (April-February).

India, which was a net exporter of steel till October, started to turn a net importer in November, when imports for the first eight months of the year (April-November) stood at 4.3 mt, 0.3 mt more than the exports.  

Rating agency Icra Ltd expects demand growth for domestic consumption to slow to 7-8% in FY25 from an estimated 12-13% growth in the year gone by. 

Citing data of domestic steel companies during state assembly elections last year, Ritabrata Ghosh, vice president, sector head, corporate sector ratings, at Icra, said trends since December reveal a marked slowdown in consumption growth to 6-7%.  

“Our channel checks with some regional steel players indicate that there was a lull in demand in states that had assembly elections in November. These early signals hint at demand remaining soft over the next two quarters as the government spending could moderate around the union election period," Ghosh said. “Therefore, domestic mills are looking at increasing opportunistic exports during this period as demand back home remains soft."

Steel industry executives shared these views, but they believe that this is a temporary lull and domestic demand will improve after the election.   

"Although exports have recorded a consecutive rise, our overall status remains that of a net importer... The recent export increase can be linked to a decrease in domestic demand, likely stemming from a slowdown in infrastructure project implementations—a typical occurrence before a general election," said Ranjan Dhar, chief marketing officer, ArcelorMittal Nippon Steel India.

“Implementing import barriers is a must to balance demand and supply. As soon as the election period concludes, we can anticipate a rebound in demand, which could lead to a dip in exports."

Analysts at BNP Paribas India also believe growth in steel exports won't sustain for long, and attributed the rise to the European Union import quota, which was exhausted in January. 

“The export volumes seen in recent months are unlikely to be sustained with EU import quotas now exhausted. And export markets (are) generally not being favourable, as Chinese exports remain at highest levels since CY16 and Chinese export offers are materially lower than Indian offers," said Priyankar Biswas, analysts–India industrials, logistics and metals, at BNP Paribas India.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Naman Suri
Naman is a skilled business journalist who excels in breaking down complex financial details. He specializes in the corporate sector, providing thorough coverage of the pharmaceutical industry, the dynamic field of sports business, and the fascinating area of white-collar crime. Naman has a knack for making sense of numbers and presenting them in an understandable way.
Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 04 Apr 2024, 03:14 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App