Demand for steel continues to remain weak in India
Chandrakant / 22 Dec 2011
Steel demand for Nov 2011 has been a little better than what it was in the last 7 months. The overall steel consumption has increased by 11.9% on a YoY basis to 5.5 MT, while production has grown by 2.2% to 5.45 MT. The growth in consumption has come as surprise for us, as we were expecting it to remain muted. However, when we looked at the absolute numbers for Nov 2010 we realised that consumption in the same period last year were at their lowest levels, creating a low base effect. This low base effect has been one of the reasons for higher growth in Nov 2011.
Further, if we look at the growth numbers on a YTD basis, it is evident that the demand has actually slowed down and remained muted during this fiscal. The consumption from Apr-Nov 2011 has grown by just 3.9% on a YoY basis to 45.09 MT.
|
|
Production in '000 MT |
Consumption in 000' MT | ||||
|
Months |
2010 |
2011 |
YoY Growth |
2010 |
2011 |
YoY Growth |
|
April |
5185 |
5435 |
4.8 |
4943 |
5018 |
1.5 |
|
April-may |
10571 |
11112 |
5.1 |
10420 |
10613 |
1.9 |
|
April-June |
15816 |
17113 |
8.2 |
16146 |
16391 |
1.5 |
|
April-July |
20968 |
22634 |
7.9 |
21806 |
22162 |
1.6 |
|
April-Aug |
26455 |
29068 |
9.9 |
27698 |
28059 |
1.3 |
|
April-Sep |
31827 |
34799 |
9.3 |
33101 |
33701 |
1.8 |
|
April-Oct |
37415 |
40688 |
8.7 |
38457 |
39582 |
2.9 |
|
April-Nov |
42748 |
46140 |
7.9 |
43396 |
45097 |
3.9 |
The reason behind slow demand for the commodity is lower consumption from the auto, construction, and consumer durables sectors. This has been a major setback for the steel industries in India, as these sectors constitute the better part of the steel consumption.
It has been seen in the past that the demand for steel and GDP growth are interrelated. Therefore, we believe that with a slowing economy (which has now been forecast to grow at 7.2% vs. initial estimates of 8% by the central govt.), the demand for steel will remain muted in the current fiscal. In a recent statement, the World Steel Association has also reduced the growth forecast for India from 13% to 4.5% in FY12.
Moreover, if the macroeconomic problems do not improve from here on, we will see a further slowdown in steel consumption globally.
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