Helped by government-led initiatives, including National Steel Policy (NSP), domestic steel demand is expected to grow by 6-6.5 per cent in the next five years, but the target reaching 300 tonne steel capacity by 2030 under NSP seems unlikely, said a report by Crisil.
Helped by government-led initiatives, including National Steel Policy (NSP), domestic steel demand is expected to grow by 6-6.5 per cent in the next five years, but the target reaching 300 tonne steel capacity by 2030 under NSP seems unlikely, said a report by Crisil.
Noting that the government envisages domestic steel consumption to grow 7 per cent through 2030 under the NSP,the rating agency said the consumption of the alloy has grown at a steady pace of 6 per cent, during the last decade (2006-07 to 2016-17).
"Over the next five years, steel demand is expected to register 6-6.5 per cent growth driven by various government led initiatives in affordable housing and infrastructure sector, coupled with robust growth in automotive and capital goods segments," the report said.
"A similar trajectory of growth in expected to continue even in long run, subject to continuation of government's initiatives. Also, NSP is expected to encourage in-house production of flat and alloy steel products, reducing their share in overall imports," it added The Union Cabinet approved the NSP 2017 on May 3, which seeks to enhance steel consumption, ensure high quality steel production, and create a technologically advanced and globally competitive steel industry.
Among others, NSP targets to achieve 300 MT of steel making capacity by 2030 through additional investments of Rs 10 lakh crore by 2030-31.
However, Crisil said the government's vision of adding 182 MT of new capacities in next 14 years seems unlikely, given that only 60 MT of capacity was added in last 10 years.
As per the rating agency estimates 24-26 MT of steel capacities could be added over the next five years, leading to aggregate steel capacity to rise to 140-145 MT by 2021-22.
"Beyond this, the trajectory of demand growth, continued government support, and pricing environment in backdrop of global over-capacity led by China would be key determinants of pace of capacity addition," the report said.
Crisil said that stagnant demand in past five years has impacted utilisation, and also aggravated the debt position of the steel sector.
It also noted that several global steel majors such as POSCO and Arcelor Mittal scrapping various greenfield steel projects, would also impact capacities.
In terms of steel trade, the NSP envisages India's steel exports to rise to 24 MT by 2030-31 from 8.2 MT in 2016-17.
However, according to Crisil with markets getting more concentrated, and looming risk associated with over-capacity in China, exports are likely to stay range bound between 8-10 MT, in the long term.
The rating agency observed that low cost competitiveness in global markets, and over-capacity in China, led exports to stagnate at about 5 MT over the past decade or so.
"In 2016-17, there was a recovery, as numerous trade barriers on Chinese steelmakers and muted domestic demand saw exports rise 102 per cent to touch 8.2MT," it said.
Significantly, it also said India is expected to continue largely relying on coking coal imports, and government efforts to reduce coking coal dependence to 65 per cent was "far fetched".
(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)
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