India's Domestic Steel Demand Slowed Down in Q2FY20

SEATTLE (Scrap Monster): The latest report published by ICRA denotes significant slowdown in domestic steel demand in India. The growth in steel demand declined to 3.1% in Q2FY20, as compared with 6.9% in Q1FY20. The mill shipments remained lacklustre in the opening week of December as well. Consequently, ICRA has downgraded the domestic steel consumption growth for the current financial year to less than 5%. This compared with the earlier guidance of 5-6% growth.

According to Jayanta Roy, senior vice-president and group head, corporate sector ratings, ICRA, the construction sector demand for steel products has not picked up as expected after monsoon. The slowdown in auto sector and reduced engineering exports are likely to keep domestic steel demand subdued, he said.

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The steel exports from April to November this year recorded a growth by almost one-third, whereas steel imports contracted by 5.3%. The country remained a net exporter of steel during this period. Going by the current trend, the steel exports by the country are likely to record almost 30% growth in FY20.

Also, the domestic steel sector’s operating margin is expected to remain at around 16.3% in FY20. The ICRA estimates also point to sequential decline in industry’s credit profile in FY20 over the prior fiscal.

Meantime, steel mills in the country have announced moderate hike in prices in November, in line with the rising trend in international steel prices.