Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

ICRA has revised the Indian steel sector’s outlook to positive from stable driven amid positive sentiments around steel-related commodities in China. The agency believes positive sentiment emerging out China has helped metals to sustain their rally for the last four quarters, stated a report by the rating agency. 


The steel price rally has helped domestic steel players to offset the impact of the pandemic. Domestic demand is likely to increase 12-13pc in FY2022 from the prior-year period, the report suggests. 


Domestic consumption increased by 12pc in the current fiscal following a 7pc drop in steel demand. Steel production could surge 14pc in FY2022 due to an increase in finished steel exports. 


Net exports of finished steel are likely to reach around 8mn mt in 2021-2022 from 6mn mt in the prior period as domestic mills are trying to increase their exports amid the government curbs on Chinese exports, said Jayanta Roy, senior VP ICRA. 


JSW Steel and NMDC will add 8mn mt of new capacities in the current year. But the same will be absorbed by rising steel consumption of 12mn mt in FY2022, leading to the revision of the industry’s capacity utilisation rates to 78pc in FY2022 from 72pc in FY2021, he added. 


On the raw material side, seaborne premium and coking coal spot offers from Australia doubled in last three months at $238/mt at August end from $112/mt in mid-May as a gradual recovery in steel demand was reported outside China. These challenges may push the cost of steel production for domestic mills by $100/mt, especially for those mills producing steel through blast furnaces mode.


Iron ore prices in Odisha have cooled off by 20pc since mid-July after taking a cue from a 28pc decline in seaborne iron ore prices since July. This could bring down the cost of steel production by around $50-55/mt, partially balancing the increase in cost from costlier coking coal purchases. This incremental benefit will only be available to the extent of market purchases by steel companies.   


No new capacity was added in India in the last two years, but now leading players, will add 34 new capacities by FY2026 in India resulting in 25pc more capacity generation in the next four to five years, said the rating agency. 


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