Performance of Indian steel industry in first 10 months of the current fiscal makes an interesting read. While availability (net of internal transfer) from all the steel producers at 63.6 million tonne has gone up by 4.4%, the real consumption has moved up by 4.1% in the same period of last year. This is nearly 3-4% lower as envisaged at the beginning of the year. The factors that have pulled down the growth rate relate to slower economic activities reflected in 5% GDP growth in 2012-13 (advance estimates), cutback in industrial output at 1% in April-November 2012, which is primarily driven by 1% growth in the manufacturing fuelled by demand contraction in Capital Goods (-11.1%) and consumer durables (5.2%). Origin of the poor industrial growth lay in various bottlenecks faced by the critical projects in power, roads and highways that was delayed due to long time taken for environmental clearances, lack of assurances on long-term coal supply agreements and inability of PPP route to attract adequate private investment. Interestingly, most of these issues are unrelated to global slowdown and are well within the domain of internal management which call for immediate resolution by the various inter-related departments and agencies.
The general mindset on charging the user charges in various sectors like gas cylinders for cooking, road and rail fares consequent on rise in petroleum prices is changing, thereby, reducing the non-plan expenditure component of the government by making a dent in subsidies.
Ban on iron ore mining in Karnataka, Goa and lately in Orissa in a modified form has taken toll on steel production and could have boosted the steel consumption up by a few percentages making more steel available in the country. This is the ideal way to enhance consumption. In the first few months, the rising trend in imports of steel to the extent of 40% has contributed to the growth in consumption.
In a few categories like HR Coils and CR Coils, the import growth exceeded the growth in exports in the initial few months, taking advantage of the low prices offered by Chinese and CIS producers as well as by duty concession granted to Japan and South Korea under FTAs within CEPA (2% from January 2013 against normally applicable 7.5%). From the trend it appears, India would import around 2.4 million tonne of HR and 1.8 million tonne of CR and would remain a net importer with an export of around 1.5 million tonne and 0.5 million tonne of HR and CR in the year.
India?s steel imports are exhibiting a growth of 17% in first 10 months of the current year and may end the year with record import arrivals of more than 8.4 million tonne (with approximately 7.8 million tonne of scrap) and export of more than 5.2 million tonne of steel in FY13. The balance of trade in steel with scrap and miscellaneous steel items imports would continue to stay in the negative in the next few years.
The author is DG, Institute of Steel Growth and Development. Views expressed are personal