However, FY20 has seen a lacklustre start for the domestic steel industry.
The slowdown has been pervasive across production, consumption and prices due to weak demand from user industries. Globally too, weak economic growth, festering trade tensions between the US and China, and higher steel production from China have led to depressed steel prices.
Manish Kharbanda, president, Pellet Manufacturers Association of India (PMAI) said, “The steel industry
appears to have been in a slowdown. Product prices have dropped by 15-30 per cent. Unless the government comes out with suitable measures, the deceleration in steel growth looks inevitable”.
Steel consumption rose at a slower pace of 5.7 per cent to 33.3 million tonnes during the first four months of FY20 (April-July 2019) compared to the growth of 9.2 per cent during the corresponding period of the last year. A slowdown in the automotive industry and a marginal growth in the consumer durables segment hurt steel demand.
"In addition to this, moderation in construction activities around general elections is also believed to have impacted consumption of steel. These factors thus resulted in mere 1.4 per cent growth in finished steel production to 18.1 million tonnes during April-May 2019. Similarly, crude steel production increased by a marginal 2.7 per cent to 36.9 million tonnes during April-July 2019 compared to a rise of 10.6 per cent during April-July 2018," said a steel industry
update by CARE Ratings.
The country's automobile production sagged 10.5 per cent during April-June of this fiscal year as against a robust growth of 16.6 per cent noticed in the comparable period of FY19. Output from consumer durables segment was also muted and rose by a meagre 1 per cent in April-May of 2019 compared with 5.4 per cent in the year-ago period.
The two factors combined pulled down prices of flat steel products
- cold rolled (CR) coils and hot rolled (HR) coils - in the range of 4-7 per cent during Q1 of this fiscal. Prices of TMT bars also fell by 1.1 per cent between April and July.
Depressed product prices rubbed off on the sales and profitability of companies manufacturing steel and iron products in Q1 of FY20. Industry sales declined by 3.5 per cent, while net margins contracted in the range of 4.1-5.5 per cent.