1. Sustainable IIP growth sounds well for steel sector

Sustainable IIP growth sounds well for steel sector

The SMEs take a production share of 64% in TMT, 38% share in wire rods, 92% share in plain rounds and more than 66% share in structurals. It is known that SMEs are the major producers of alloy and SS long products.

By: | Published: October 17, 2017 3:20 AM
Among the various sub segments under manufacturing, the manufacture of fabricated metal products clocked a growth of 4.3% during the month, although cumulatively this segment shows a negative growth. (Reuters)

The quick estimates of IIP brought out by CSO for the month of August 2017 has brought some cheers to the industry, which has grown 4.3% over the corresponding month of last year. The rate of industrial growth, which was hovering between (-) 0.1% to 2.5% for quite a number of months in the past, has risen to a reasonably good level. Both mining and electricity generation have clocked growth as high as 9.4% and 8.3%, respectively, while manufacturing sector with a weightage of around 78% in IIP has moved up by 3.1% during the month. The tardy growth in manufacturing in the previous months did not allow the cumulative growth in the sector for the first 5 months of the current fiscal to grow more than 1.6%, thereby restricting IIP to grow at a moderate rate of 2.2% during the period.

Among the various sub segments under manufacturing, the manufacture of fabricated metal products clocked a growth of 4.3% during the month, although cumulatively this segment shows a negative growth. The manufacture of machinery and equipment other than electrical has risen by a record 10.2% in August (cumulatively 3.7%). This has helped the indigenous production of plates to grow by around 18% in the first 5 months and the consumption by nearly 8%. Similar high growth performance is observed in manufacture of motor vehicles, trailers (8.2% in August and cumulatively 3.1%) and manufacture of other transport equipment (11.1% in the month and cumulatively 9.9%). This has reflected in higher consumption and production of CRC, coated products and structurals during the period. However, a high negative performance has earmarked the electrical equipment manufacturing segment (- 9.0% in the month and cumulatively (-) 14.3%) as well as the manufacture of furniture (-16.0% in August and cumulatively (-) 0.9%).

As regards the last two negative performers, there has been an upward swing in flow of imports, which has replaced the domestic production in some categories due to price and design innovativeness in reinforced plastic. The import of electrical stampings and laminates, parts and components of transformers, motors and generators, which are classified under HS codes 85030010, 85049010, and others is taking place as these are not covered under BIS certification. It has also been reported that under the advance licence scheme for exports, low quality electrical steel sheets are arriving in the country as these do not attract mandatory quality control certification by BIS. These are directly flowing to the domestic market under the pretext of order cancellation or quality non-conformance. During April-August 17, the total consumption of electrical steel sheets in the country has grown by more than 43%, contributed by 70% growth in imports of CRNO/CRGO sheets, while domestic production has grown by only 19%. Unless this trend is restricted by suitable regulatory measure on diversion to domestic tariff area, it would enhance the injury to the domestic steel manufacturers in many other steel categories as well.

Under use-based classification, the capital goods comprising of heavy machinery and equipments and therefore most steel intensive segment has clocked a reasonably high 5.4% growth, although cumulatively it is negative at 1.9%. The infrastructure and construction goods segment, another strong user of steel materials, has grown 2.5% in the month, maintaining the almost similar growth rate as in previous months.

The consumption growth of bars and rods and structurals in the current year is almost at the same level as last year due to a sluggish rise in infrastructure and construction segments. The SMEs take a production share of 64% in TMT, 38% share in wire rods, 92% share in plain rounds and more than 66% share in structurals. It is known that SMEs are the major producers in alloy and SS long products. The growth in retail and rural sales is reflective of higher sales of TMT and GP/GC sheets. The consumer durable segment, which faces a stiff challenge due to unabated flow of imports, has clocked only 1.6% growth in the month and performed a poor negative performance of (-) 0.9% in the first 5 months of the current year. Intermediate goods segment that contains a part of steel items (semi finished), clocked a negative growth in the month. A look at the import flows in the April-August’17 period indicates a very significant rise in imports of pipes, coated products, electrical sheets, rerollable scrap and HR coils. While increasing imports in each of these categories need analysis, steel industry must look into the imports of steel containing engineering goods, which are also rising in the present context.

Sushim Banerjee
DG, Institute of Steel Growth and Development

  1. No Comments.

Go to Top