Editorial


Steel utilisation to surge thanks to Budget outlay

Steel consumption has returned to pre-Covid-19 levels because of strong demand from the infrastructure and vehicle industries. Over the previous two years, steel companies have leveraged the bull market to deleverage their balance sheets.

As manufacturers make solid profits during the ongoing cycle of high commodity prices, the domestic steel industry will now dominate private sector investments in India.

To help secondary steel companies, the government has extended the steel scrap customs duty exemption for another year in its Union Budget for 2022-23.

The continuation of a duty exemption on steel scrap imports will be a huge boon to the local steel industry, particularly secondary steel producers who rely heavily on imported ferrous waste as a vital raw material.

Domestic finished steel consumption is expected to increase sequentially in the fourth quarter of FY22, as steel companies normally catch up on execution and business after the monsoon season, which had hampered operations in the third quarter.

The demand pipeline appears to be strong. In addition, with the Budget announcements, the infrastructure sector will receive a boost, boosting steel demand.

The government announced more spending on infrastructure in the Budget, which the steel industry expects would stimulate demand even further. The entire allocation for the roads sector has been boosted to Rs 1.99 trillion from Rs 1.18 trillion in FY22, in addition to an outlay of Rs 7.5 trillion for FY23.

Top three producers - Tata Steel, JSW Steel, and ArcelorMittal-Nippon Steel - have discussed plans of investing up to Rs 1.5 lakh crore over an unspecified period.

Officials in the steel industry, on the other hand, believe that the present steel prices are too high, and that industries and customers are waiting for a price drop. Domestic demand and rising coking coal prices are projected to keep prices range constrained in Q4FY22, which will be slightly offset by the surge in Omicron.

India is a more logical site to export from than China, Japan, or Korea, which have historically been Asia's largest exporters. They have been exporting more than 100 million tonne of steel between them, so India has a chance since it has iron ore and world-class competitive steel mills.

 

As a result, it is a great opportunity for India, as has been proved last year.