Global crude steel production in the first eight months of 2012 , according to worldsteel estimates, is marginally higher than the previous year?s level.
If the current economic environment continues and as there is no reason to believe that buying of bonds by the ECBs would immediately impact the depressing scenario in Europe, we may end up with a production of a little more than 1.6 billion tonnes this year.
In the context of world GDP projected to come down to 3.5% compared to last year?s growth of 3.9%, the increase in steel production only indicates that output growth in the emerging economies (Asia) and partially in North America has made up the shortfall in the advanced countries. In terms of volume, EU, South America, CIS and Oceania have made available 7 million tonnes less steel, while Asia has produced an additional tonnage of more than 13 million during the period.
While steel consumption has suffered in the western world and is showing signs of deceleration in the emerging economies also, steel exports to Europe and USA from Asia, albeit negligible in volumes, are creating problems for steel producers in these countries, leading to a spate of protectionist measures under anti-dumping and countervailing duty mechanism.
The disputes settlement wings of WTO are flooded with trade friction cases that by themselves are long drawn.
The provision of sunset reviews after a period of 5 years permitted under US anti-dumping laws is another deterrent to free and fair trade particularly under the current depressing demand scenario and excess capacities with the domestic steel producers.
The bilateral treaties, which have now been termed as trade fragmentation by WTO, are messing up the world trade further. Official data indicates that in September, Indian crude steel production has risen by more than 9% compared to last September, although it is marginally lower than last month.
In H1 of the current fiscal, the consumption of steel has risen by 5.4%.
Now that a few reform measures, which were long pending, have been announced, they have had an immediate impact on share prices, the declining trend in rupee rate and the market sentiment reflected in PMI, moving it up to52.8 in September.
In all likelihood, a few more reform steps before the yearend that would ease borrowing curbs, facilitate investment flow and perk up mutual fund and other avenues of saving away from blocking funds in gold and idle assets.
It would boost commodity demand. All eyes would be on RBI?s next move on interest rate and a small reduction would supplement immensely all the other reform measures to enhance capital flow and give a jerk to the sagging demand.
At the beginning of Q3 a 7-7.5% growth in steel consumption in H2 can be predicted. Taken together, steel demand must grow at 6.5-7% minimum in 2012-13.
We have before us a lower GDP forecast of 5.6% for 2012 by ADB and IMF may also lower its earlier forecast of 6.1% and all these may not support this optimism in steel. Only a few more months should endorse our views.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal