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Business News/ News / India/  Steel demand to witness continued growth next year
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Steel demand to witness continued growth next year

India's steel demand is expected to continue growing in 2024, but the pace may slow due to potential reduction in government spending ahead of general elections.

Tata Steel sees growth in demand for steel to stay for the medium term.Premium
Tata Steel sees growth in demand for steel to stay for the medium term.

New Delhi: India’s steel demand is set to continue its growth trajectory during 2024 but may slacken, as general elections due next year could potentially slow government spending, predict industry insiders and experts.

With a consumption growth rate of around 15% y-o-y (year-on-year) in the first 10 months of the year, the overall Indian steel industry has experienced a demand surge that aligns directly with the overall GDP growth. Steel demand registered a growth of about 10% during FY23, when consumption touched 120 MT.

“Steel demand growth has been way higher than GDP growth this fiscal because of extensive government spending on infrastructure in a pre-election year and acceleration in the pace of construction and infrastructure ahead of the general elections next year," SteelMint, a market intelligence and price reporting firm, said.

Under the budget for FY24, capital investment outlay for infrastructure was increased by 33% to 10 trillion, which is almost three times the outlay of 2019-20.

“India’s emphasis on sustainable solutions is expected to drive increased usage (of stainless steel) across traditional applications, process industries, and the household sector, as well as in emerging strategic sectors such as defence, aerospace, and the green and blue economies," Abhudhay Jindal, managing director of JSL said.

Tata Steel sees growth in demand for steel to stay for the medium term. “The Indian economy is likely to remain buoyant even with a high-interest rate environment, and Indian steel demand is expected to retain its growth momentum. Investments in infrastructure and real estate, strong consumer sentiments, and government focus on turning India into a global production hub will continue to drive the domestic steel demand in India," Tata Steel said in an email response.

However, some observers see elections impacting the sector. “We might witness a decline in demand during Q4. As the election code of conduct kicks in, it is likely to have an influence on the impetus to infra and construction spending. So, we can expect a shift from the current 15% growth to around 10% by the close of FY24," said Priyesh Ruparelia, vice president, co-group head, corporate sector ratings at Icra Ltd.

Anticipating India’s growth story to continue, top domestic players have also announced significant investments during the current fiscal year, but that is being threatened with the country becoming a net importer of steel.

India, during the first seven months of the current fiscal year (April – November), transitioned into a net importer of the alloy, importing 4.3 million tonnes of steel, as against exports of 4 million tonnes during the same period last year.

The industry has met the government on the issue, which has promised to act on it.

Jindal, meanwhile, suggests a short-term implementation of restrictions on import to ensure level-playing field.

“To address the influx of substandard imports from China, we advocate for a short-term implementation of a level-playing field, particularly crucial as one-third of the stainless steel industry falls under the MSME category. Additionally, the higher costs of logistics and capital in India have made the Make in India initiative less competitive, although the government’s introduction of a logistics policy is a positive step," said Jindal.

“In response to global tariff barriers like anti-dumping duties and countervailing duties on Chinese products, we urge the government to establish similar barriers in India. Even the EU is planning a non-tariff barrier like CBAM," he added.

Tata Steel claimed that being one of the lowest-cost producers of steel, cheap imports haven’t had any impact on it, but believes any predatory pricing will be dealt with at the government-industry level.

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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.
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Published: 25 Dec 2023, 10:12 PM IST
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