Domestic steel demand is likely to remain subdued going forward, even in the seasonally strong quarters, following slowdown in key consuming sectors like automobile and construction, and due to overall weak economy sentiments, manufacturers and analysts said.
“The demand scenario is terribly bad. No new infrastructure projects are coming up. Demand from heavy- as well as medium-size vehicle segments has slowed down. I don’t see any improvement in demand. In fact, expect a further fall in demand in the upcoming quarter,” said R K Goyal, MD of the Pune-based Kalyani Steels.
After the second quarter results, most steel players had indicated significant improvement in steel demand, following the end of the monsoon season and the beginning of the festival season. JSW Steel and Tata Steel had indicated a pick-up in demand.
However, after October, these companies have not been able to effect any price hikes. Steel prices have been rolled over for the past two months, indicating pressure on the demand front.
“For this month, we have rolled over prices, but we are reviewing them. There might be an opportunity in January for a price increase. While international demand is improving in the domestic market, by and large, there is status quo. Some pick-up in demand is seen from export-based manufacturing and from the rural two-wheeler segment,” said Jayant Acharya, director, commercial, JSW Steel.
However, it is possible that this time round demand may not substantially improve in January-March as has been the case so far, and there could be a delta change.
Most analysts agree that compared to last year, demand would definitely be lower. However, in comparison to the first half, it would be slightly better.
According to official data, steel consumption has grown by mere 0.8% to 36.59 million tonne during April-September. Steel-makers that were initially expecting demand to grow around 5% in the second half had scaled it down to 2-3% by end of the second quarter.
Last fiscal, steel consumption had increased by a mere 3.3% on-year to 73.3 million tonne. It seems unlikely that in the remaining four months of this fiscal, even this growth could be achieved, experts said.
Usually, the fourth quarter (Q4) alone contributes as much as 30% of overall volumes of steel-makers, Giriraj Daga, an analyst with Nirmal Bang, said. He concedes Q4 may not be strong, but there could be improvement sequentially.
Gautam Chakraborty, an analyst at Emkay Global Financial, expects a slump in demand and pricing pressure to continue, going forward. “Restocking demand which generally happens in Q3, may not happen this time. Traders are doing hand-to-mouth buying, so demand will remain subdued.”
In fact, till September, players like Sail and Tata Steel had inventory build-up of up to 1.3 million tonne and 0.7 million tonne respectively.
Market players are now hoping that any announcement of the 2014 general election schedule would revive demand to some extent as it could end the policy paralysis.
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