Posted on 03 Apr 2023
India’s steel production is estimated to grow 4-7% to 123-127 million tonnes in FY24, CareEdge Research said on Friday.
The domestic consumption growth rate is also expected to be healthy at 8-10% in FY24, driven by increased infrastructure spending, a surge in real estate and construction activities, and strong auto sales.
As India has entered its pre-election year in 2023, the government is likely to increase investments both at the state and central level. This includes a 33% increase in budgetary capital expenditure to Rs. 10 lakh crores for infrastructure, a capital outlay of Rs. 2.4 lakh crore for Indian Railways, and the announcement of 100 transport infrastructure projects. These initiatives bode well for domestic demand.
Additionally, the uptick in construction and real estate activities is driving the demand for steel products. The automobile sector, which witnessed a 21% year-on-year growth during 11M FY23, further indicates the growing demand for steel.
According to CareEdge Research, during 11 months in FY23 (April 2022 – February 2023), the domestic finished steel production and consumption in India grew by 6.2% and 11.6%, respectively, on a year-on-year (y-o-y) basis.
However, steel exports declined sharply by 52% y-o-y due to weak global demand and the imposition of a 15% export duty on steel products from May-November 2022.
“Imports increased by 29.5% y-o-y during this period, and India became a net importer of steel for the first time in three years for the period of October 2022 to February 2023,” it said.
Steel players in India witnessed a dip in EBITDA margins for the quarter ended December 2022 as compared to the same period last year. This was primarily due to an increase in coking coal prices and muted steel prices.
“The domestic steel demand growth is expected to be healthy at 8-10% in FY24. This will be driven by an increase of 33% y-o-y in the government’s budgeted capex on infrastructure development and an uptick in the real estate and construction industry,” said Tanvi Shah, Director at CareEdge Advisory & Research.
“On the other hand, exports have been increasing on a sequential basis from December 2022 onwards, post the withdrawal of the export duty on steel products and iron pellets. This is expected to result in higher export volumes in FY24,” she added.
However, the operating profit margins of steel players are expected to remain under pressure in FY24 due to elevated input costs of iron ore and coking coal. International steel prices are also expected to remain range-bound in the near term.
Source:Livemint
