Posted on 18 Sep 2024
Indian domestic steel consumption should increase by 9-10% on-year in the fiscal year ending March 2025 (FY25), according to Indian credit ratings agency ICRA. The projection comes after robust demand in the April-June quarter, with consumption growing at a rate of 15% on-year amid competitively-priced imports.
The agency expects a sequential slowdown in demand in the September quarter due to monsoon-related seasonality. But it expects a “back-ended pick up” due to government capital expenditure. The steel industry’s capacity utilisation is forecast to hit a decadal-high of 88%, in spite of an all-time-high-capacity addition of 15.6 million tonnes/year in FY25, as well as the surge in imports.
ICRA senior vice-president and group head, corporate sector ratings Girishkumar Kadam said: “With domestic steel prices already trading at a premium to import parity prices, substantial duties would be required to have any significant impact on domestic prices.”
“Domestic steel prices have been under pressure from mid-May 2024 on the back of unabated imports. Despite this, steel spreads will remain supported by the significant correction in raw material prices seen in recent months. Australian-origin prime hard coking coal has corrected by almost 45% from the high watermark of $338/tonne (fob basis) in the second week of January 2024, to $185/t in the first week of September 2024,” Kadam notes in a report seen by Kallanish.
“With coking coal accounting for 40-50% of the overall operating cost for a primary steelmaker, this material input cost moderation, along with iron ore price reductions, with the leading merchant iron ore producer NMDC Limited slashing iron prices by almost 18% from the peak levels seen in the month of May/June of 2024, will support steel spreads going forward,” Kadam reasons.
ICRA projects some moderation in spreads in the September quarter due to a lag in seeing the benefits of lower raw material costs. It also estimates gross steel spreads for primary steelmakers will contract by INR 500-1,000/t ($6-12) on a sequential basis, before inching up from the December quarter.
Source:Kallanish
