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Steel News May 09, 2017 10:30:08 AM

NSP boom likely to deliver 6% steel demand growth for next 5 years

Anil Mathews
ScrapMonster Author
The government targets 7% annual growth to domestic steel consumption through 2030.
NSP boom likely to deliver 6% steel demand growth for next 5 years

NEW DELHI (Scrap Monster): A recent report released by CRISIL, the global analytical firm suggests that various government initiatives such as the National Steel Policy (NSP) 2017 will help the country to sustain 6% steady growth in steel demand over the next five years. However, the agency is quite doubtful about achieving 300-tonnes steel capacity target by 2030, as outlined by the NSP. Last week, the Union Cabinet had approved the NSP which proposes guidelines to create technologically advanced and globally competitive Indian steel industry.

The government targets 7% annual growth to domestic steel consumption through 2030. The rating agency noted that consumption of steel has been posting steady growth of around 6% per annum during the past decade. Over the next five years, rapid growth in housing and infrastructure sector along with robust growth in automotive and capital goods sectors will deliver 6-6.5% growth in steel consumption rates. The growth is expected to sustain at those levels in the longer term, the report said.

The target set by NSP of achieving 300 tonnes of steel capacity by 2030 seems unlikely, the report noted. NSP aims to add 182 tonne of steel capacity over the next 14 years. However, the target seems unlikely, taking into account the fact that the country has added only 60 tonnes of new capacity during the past decade. As per agency estimates, nearly 24-26 tonnes of steel capacities could be added over the next five years. The pace of capacity addition is likely to be impacted by multiple factors including global steel prices and the extent of support to the sector from the government. The scrapping of various Indian greenfield steel projects by steel majors such as POSCO and ArcelorMittal has been a serious blow to the country’s steel capacity addition plans, the report added.

The overcapacity in China and flooding of cheap steel products by that country into global steel market restricted India’s steel exports. The exports hovered around 5 tonnes over the past decade. The trade restrictions imposed by several countries on Chinese steel coupled with muted domestic demand led to huge rise in Indian exports during 2016-’17. The exports surged higher by more than 100% over the previous year to total 8.2 tonnes during the year. According to CRISIL, the exports are likely to stay range bound between 8 tonnes and 10 tonnes in the long term. The agency is skeptical about the NSP view that India’s steel exports will rise to 24 tonnes by 2030-’31.

It must be noted that Care Ratings in their recent report had predicted that India’s steel production and consumption is likely to remain higher during 2017-’18. The country is likely to witness huge revival in steel consumption, backed by increased demand from construction and infrastructure sector. According to the report, although steel consumption is likely to remain under pressure for a few months on account of cash crunch situation caused by demonetization, the demand from all sectors are likely to strengthen in the near-term.

According to NSP, the Indian steel industry has significant potential for growth. It outlines significant capital investment of around Rs 10 lakh crores to create additional capacity, which in turn is expected to generate around 11 lakhs job opportunities.