Some interesting developments are going to unfold this month or early next month that will have far reaching implications for steel and other industrial products. First, US lawmakers? approach towards the ?fiscal cliff? involving the continuation or withdrawal of tax exemption (approx. $600 bn) and stimulus measures by the country would determine if the fiscal deficit reaches the unmanageable limits beyond January 1. Latest GDP growth estimates for the US by OECD have been revised upwards to 2.2 percent.

The Markit index for business sentiment for December has predicted an upward trend. Fresh job creation of nearly one and half lakh numbers in November indicated that manufacturing sector is gradually coming on rails, but may adversely affect job creation in India by curtailing outsourcing. It is widely believed that Republicans and Democrats would reach a consensus at all costs by mutual compromises on tax increases, particularly on the richer class and spending cuts on health and other welfare sectors to avoid the ultimate risk, although initial attempts to raise tax rates have been resisted by the Republicans. If US economy could start reversing its fortune by H1 in 2013, it would have a great positive impact on other parts of the globe in terms of market access for a host of manufactured products. The opening of US market would lead to production growth in China, which would be looking for opportunities not only for direct exports but also for indirect exports.

And higher capacity utilisation for Chinese goods would contribute to the fortunes of other countries. Secondly, the approval of fresh Greece package may lead to a readjustment of austerity measures and steps taken by the Europe Central Bank in readjusting the loans and providing support to sovereign bond markets are likely to bring down the severity of Euro zone crisis and raise hopes for a revival in the later part of 2013. This has prompted Arcelor Mittal plants in Europe to seek price rise ranging $30-$40/t for flat products in January.

Thirdly, China?s new regime has already announced a few mega projects in railways and irrigation in China and the expectation that more of such measures would be initiated in March after its formal take over have already made forecasters retain their earlier estimate on GDP in China at 7.7 per cent in 2012 and 8.5 percent in 2013. A latest indicator to Chinese growth is the rising trend in import price of iron ore as price of Indian origin iron ore of 63.5% has already crossed $135 CFR China. Chinese domestic steel prices are rising, both long and flats on an average by $25-$35/t.

Thus, globally there is a favourable environment of price increase whatever may be the actual extent in the next month. The anticipated flow of FDI in retail and aviation and the proposed Cabinet committee on investment to expedite and clear hurdles for the projects exceeding R1,000 crore would improve the market sentiment in India significantly in the coming months.

Official estimates have put GDP growth for the current fiscal at 5.7-5.9 per cent ? though respectable compared to growth estimates of other countries in the world, it is much lower than 8.2 per cent envisaged for the draft 12th plan document. Steel consumption in the current year is likely to grow by 5-5.5 per cent. Falling trend in prices is stalled, inventory accumulation at the buyers ?end has commenced. The money market is likely to be relaxed with a possible interest cut by RBI in the next month. The picture that is emerging is favourable for higher realisation for steel products.

The author is DG, Institute of Steel Growth and Development. The views expressed are personal