Economic Slowdown Impacting Steel Demand in India

Sep 4,2019

The slowdown in the economy has clearly not spared the core sector of steel production with crude steel output growing by a meager 1.7 percent in July, to 9.2 million tonnes, compared to the previous.

Crude steel production, month-on-month, appears to have declined from the 4 percent growth seen in June, when the total production in India was 9.3 million tonnes, according to the World Steel Association or World Steel.

“That the crude steel production has declined over June is reflective of the broader softening in the economy. When there is no demand from critical industries like construction and the automobile sector, then steel manufacturers will certainly face the slowing demand,” says B.N. Singh, a former chairman and managing director of Rashtriya Ispat Nigam Ltd, which owns and operates the Visakhapatnam Steel Plant.

“Apart from the real-estate sector, there is also lesser demand from the infrastructure sector as well which consumes a lot of steel, particularly long products. I think that going forward unless the government spends a lot more on infrastructure, the demand for steel in India may face less demand,” Dr. Singh, who also served as managing director of the Algerian subsidiary of ArcelorMittal, the world’s biggest steelmaker, said on Tuesday.

According to world steel, China continued to be the top crude steel manufacturer in July, with a total production of 85.2 million tonnes, an increase of 5 percent over the same month last year.

Dr. Singh said, “Some Indian steel companies like RINL-VSP have increased their capacity hoping that a growing economy will need more steel. To be fair to Rashtriya Ispat Nigam Limited (RINL) - Visakhapatnam Steel Plant (VSP), the company launched its plan to increase its capacity from 3 million tonnes per annum to 7.4 million tonnes per annum a while back, but the new capacity has come online only recently. It will be a challenge for RINL-VSP to service the debt it raised for its expansion.”

World crude steel output in the first six months of 2019 was 925.1 million tonnes, up 4.9 percent over the January-June period of 2018, according to world steel, the world’s largest steel association. Of this, Asia, including India, produced 660.2 million tonnes, the world steel data said.

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