Steel Industries Growth and Trends of Pricing

The steel industry worth more than $100 billion is projected to raise the domestic demands of 2016 as it works hard to counter the pricing and excessive imports which shook the sector back in 2015. By the end of the year, India is expected to climb one step ahead to become the world’s second leading producer of crude steel. The country’s current position as the third leading producer has seen many changes in the domestic markets.

This growth has been powered by the readily available raw materials like iron ore together with a cost effective labour. Subsequently, the steel industry has formed the core contributor of the country’s manufacturing output.

The size of the market

The capacity of crude steel in India attained the 109.85 million tonnes during the 2014–2015 period which was a 7.4 percent growth. The production of finished steel ready for sale recorded a 5.1 percent growth to 92.16 million tonnes. Finished steel consumption also grew by 3.9 percent to 76.99 million tonnes. As of September 2015, production of steel in India was 7.34 million tonnes which was almost the same to the steel production in September 2014.

The steel industry accounts 2 percent of the gross domestic product of the country and provides more than 600,000 employees. Finished steel consumption per capita recorded an increase from 51 kg in the 2009–2010 period to around 59kg for the 2014–2015 period. For the financial year 2015–2016, consumption increased by 7 percent which was 2% more than that of the previous year. This growth is attributed to the improvements in the economic activities recorded during the 2015–2016 period.

Even though the industry was tense in 2015 due to the rising imports and predatory pricing, the situation in 2016 is a little bit different. Narendra Singh Tomar, the Steel Minister reported that India increased its steel production and demand this year.

Price trends

2015 was the year that not only India was faced by poor steel prices, but the world all over was under the same problem for one major reason; oversupply of steel. The world’s largest producer of steel, China was reacting by producing enormous tonnes of steel for export and this greatly affected India. This was contributed by the reduced prices of iron ore, an important raw material, which fell lower than $50 per metric tonne during the 2015’s first half. This enabled mills to afford the rates of operation hence driving the supply up.

Currently, the Indian steel market is not doing as bad as compared to last year, however, the threat of import is still lingering on. The government however is taking action to reduce the impact caused by import by making contacts with the Commerce Ministry concerning the issue. Even though the profitability of the steel firms in India for 2016 is projected to be lower than previous year, the country is better positioned than the Asian peers. The safeguard duties imposed is expected to create a positive impact on the steel producers’ profitability in India, despite China boosting its steel exports to India.

Expected growth

By the year 2025, the country is expected to rise from third largest producer to the second largest producer of crude steel. This is because India’s capacity is expected to grow to approximately 300 million tonnes by the year 2025. The estimated growth in consumption is as a result of increased infrastructure and the flourishing railways and automobile industry.

As for 2016, the steel market in India is greatly dependent on how the import scenario is shaping up plus demand in infrastructure.

Originally published at www.ofbusiness.com.