Domestic Steel Demand Posts Good Growth For February 2012
DSIJ Intelligence / 19 Mar 2012
The steel consumption in the month of February 2012 has grown by 10.3 per cent on a YoY basis to 5.93 million tonnes.
The steel consumption in the month of February 2012 has grown by 10.3 per cent on a YoY basis to 5.93 million tonnes. If we look at the growth in steel demand in the last three months published by the Joint Plan Committee it is quite surprising to see that domestic steel consumption has seen the highest growth during the fiscal year 2012. The consumption in February and in the last four months has grown strongly between 8.8 per cent and 10 per cent on a YoY basis. Between April and February the consumption has grown by 5.2 per cent on a YoY basis.
|
| Production | Consumption | ||||
|---|---|---|---|---|---|---|
| Months | 2010 | 2011 | YoY Growth | 2010 | 2011 | YoY Growth |
| Apr | 5,185 | 5,435 | 4.8 | 4,943 | 5,018 | 1.5 |
| Apr-May | 10,571 | 11,112 | 5.1 | 10,420 | 10,613 | 1.9 |
| Apr-Jun | 15,816 | 17,113 | 8.2 | 16,146 | 16,391 | 1.5 |
| Apr-Jul | 20,968 | 22,634 | 7.9 | 21,806 | 22,162 | 1.6 |
| Apr-Aug | 26,455 | 29,068 | 9.9 | 27,698 | 28,059 | 1.3 |
| Apr-Sep | 31,827 | 34,799 | 9.3 | 33,101 | 33,701 | 1.8 |
| Apr-Oct | 37,415 | 40,688 | 8.7 | 38,457 | 39,582 | 2.9 |
| Apr-Nov | 42,748 | 46,140 | 7.9 | 43,396 | 45,097 | 3.9 |
| Apr-Dec | 48,415 | 52,060 | 7.5 | 48,698 | 50,864 | 4.4 |
| Apr-Jan | 54,512 | 58,251 | 6.9 | 54,244 | 56,813 | 4.7 |
| Apr-Feb | 60,155 | 63,894 | 6.2 | 59,677 | 62,806 | 5.2 |
The infrastructure and construction activity after monsoon and the demand coming in from the rural areas as well. As per the latest GDP numbers, the infrastructure industry in the third quarter of the fiscal grew by 7.2 per cent from 4.2 per cent in the Q2FY12, showing signs of improvement.
This has come against the backdrop of weak global demand and lower steel prices. Further, the steel industry has been one of those few sectors that have received benefits from the budget announced on March 16. This year’s budget has provided much-needed relief for steel companies which had been facing problems over iron ore shortages and high import of cheap steel products due to a fall in global demand and prices.
The proposed hike in the import duty on flat rolled steel products from 5 to 7.5 per cent was done to protect steel companies from the higher import of steel products which were being done at lower prices by the foreign players, thus impacting the pricing power of the domestic steel companies.
Further, the budget has kept the export duty on iron ore intact at 30 per cent which was recently hiked to increase the domestic availability of the resources for steel consumption. Steel companies have been buying iron ore at high prices due to the iron ore mining ban which resulted into supply shortages.
On the flip side, the government increased the excise duty from 10 to 12 per cent. In conclusion, companies in the steel sector will witness decent revenue growth on a yearly basis on the back of higher steel prices and some pick-up in demand. However, the bottomline of these companies will continue to face pressure on the margin front due to a recent freight hike and the higher iron ore prices.
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