india's steel comsumption and manufacturing situation
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2016-07-14 View(s):
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The changing face of rural and semi-urban India speaks elaborately of the decentralised development, making a paradigm shift in quality of life indices.
To what extent the benefits of these developmental activities in the form of good roads, electricity, pucca houses, clean water, minor irrigation, primary schools and health centres are reflected in the macro indicators that form the basis of GDP calculation is an altogether different subject for the experts to decide.
In terms of segment-wise growth, it is seen that manufacturing growth of 2.0% in FY16 was contributed largely by apparel, chemicals and pharmaceuticals, auto and rubber. The steel intensive segments in basic metals, machinery and equipment, motor vehicles and other modes of transport observed growth rates of 1.0, 2.3, 7.5 and 1.3%, respectively. The construction sector (both residential and industrial) has grown by 3.5% in the last year which was lower than FY15. This had resulted in pulling down the consumption growth of bars and rods (TMT, wire rods and rounds) at 5.6%, structurals at 1.2% and pipes at 0.8% (transportation of oil, gas and sewerage).
The demand for railway materials led by rails that had seen a 6.2% rise in last year would continue to increase in the next few years with DFC, doubling of lines in secondary routes and Metro Rail expansion. Higher consumption of CR sheets/Coils (by 19.6%) resulted from 7.5% growth in automobile and consumer durables (output growth by 11.2%) while growth in HRC/Sheets at (-) 6.6% was indicative of subdued growth in tubes and pipes segment.
The indigenous steel industry was, however, denied the benefits of growth in consumption of plates (9.2%) and CR that went to the large exporters in China, South Korea and Japan.
In the first three months of the current fiscal, steel consumption that rose by 2.8% in April-May ’16 has dropped to (-) 4.3% in June leading to pulling down the overall growth to 0.3% only. In June, while non-alloy steel consumption dropped by 2.2%, the alloy and stainless steel went down by as high as 20.0%. It is interesting to note that imports that went down by 30.7% in the first quarter of the current fiscal over the corresponding period of last year did not leave enough space for the domestic producers as has been predicted by many. The finished steel availability from indigenous sources went up be a meagre 3.8% in the period as the market absorption was limited to this extent only. he competitive pressure on prices proved beyond doubt that demand growth was minimal.
For the first six months of 2016, steel consumption in the country has gone up by 2.1% against 5.4% growth for the full year projected in the short range outlook of WSA. To achieve this by the year-end, Indian steel consumption needs to grow at 8.7% in the remaining six months of 2016.
The challenge is difficult, not insurmountable. The industry has a major role to play to promote higher use of steel in public and private investment.
