Firm domestic demand to keep India's steel imports elevated in 2023-24: Crisil

Business Friday 22/December/2023 13:20 PM
Firm domestic demand to keep India's steel imports elevated in 2023-24: Crisil

New Delhi: Strong domestic demand, supported by government spending on infrastructure, building and construction segments, is expected to keep India's steel imports elevated around the 6 million tonne (MT) mark this financial year even as the global steel industry battles a slowdown, according to rating agency Crisil.

Global steel demand, which has been subdued since the onset of the Russia-Ukraine conflict, is expected to grow 1.6 per cent in 2023 after a sharp fall of 3.3 per cent in 2022, the rating agency said in a report.

Indeed, even that tepid rate of growth rides largely on a buoyant 13 per cent growth in demand in India, which has bucked the trend so far. This fiscal, the steel sector in India is poised to clock its third consecutive year of double-digit growth, at 11-13 per cent year-on-year, after growing 11.4 per cent and 13.4 per cent in fiscals 2022 and 2023, respectively.

According to the rating agency, demand in China, the world's largest producer of the commodity, has started reviving after a three-year slump.

However, oversupply has led to subdued prices.

"Over the past few months, Chinese mills have been facing margin pressure, mainly due to high raw material prices and a depreciating yuan. Although the Chinese government is trying to keep demand afloat with infrastructure spending and relaxing policies on property ownership, real estate continues to be in a recessionary phase," the rating agency noted.

Chinese mills have started pushing volumes into the global market at highly competitive prices.
Between January and November this year, exports from China increased by 35.6 per cent to 82.7 million tonnes -- the highest since 2016.

Chinese exports to India have also surged.

Strong growth momentum has supported steel prices in India, and import volumes have increased significantly, driven by better realisation opportunities. As of November this fiscal, India had imported 4.26 million tonnes of finished steel, up 13.4 per cent year-on-year even as its exports declined 6.2 per cent to 4.03 million tonnes, making the country a net importer of finished steel.

Among the ports, Mumbai remains the preferred destination for both alloy and non-alloy imports, accounting for 40 per cent of the total imports, followed by Mundra and Chennai.

"This imbalance of volume at the ports leads to regional disparities in domestic prices. For instance, although prices of flat products corrected across India in November, the fall in trader prices was more significant in Mumbai compared with other major domestic steel markets," the rating agency noted.