Growth of Industrial Production in August’18 at 4.3% with manufacturing at 4.6% is somewhat lower than what was expected with the publication of July results. But there is lot to cheer about for the industry.
Growth of Industrial Production in August’18 at 4.3% with manufacturing at 4.6% is somewhat lower than what was expected with the publication of July results. But there is lot to cheer about for the industry. And here the revision of output data for the previous months has come to the rescue. The August figure includes the first revision of July figures and the final revision of May figures. As a result the cumulative IIP figures signal respectable growth in the critical sectors. For April-August’18 period, the manufacturing has grown by 5.4% against 1.7% growth in the previous year taking IIP to grow by 5.2% against 2.3% achieved last year.
A few steel intensive sectors have also behaved well. Capital goods, the most steel heavy, have moved up by 6.8% against a negative growth of 1.4% in the previous year. It has reflected in 6.3% growth in consumption of steel Plates during the period by enhancing domestic availability by around 1,70,000 tonnes and reducing plate imports by more than 20%. Consumption of Steel Structural moved up by 7.1% during the period. Also Steel Pipes (large dia) consumption has gone up by 6.4%.
Infrastructure and Construction sector accounting for nearly 62% of steel consumption in the country has similarly grown by 8.3% against 2.4% of last year, displaying the Bars and Rods consumption reaching a level of 14.9 MT with an impressive 9.0% growth over last year. This is most encouraging as it has led to more than 8% growth in indigenous production of Bars and Rods and also much higher capacity utilisation by the SME sector which is predominant in this sector. Apart from rise in domestic availability, the imports of large dia Pipes has gone down by 47%. Even this lower volume of imports contains imports of defective Pipes of more than 21,000 tonnes.
The consumption of Rails for laying down tracks either for track renewal, gauge conversion or laying down new lines has gone up by 9% during the period. The domestic appliances sector has also grown by 8.6% per cent against the negative growth of 0.3% of last year which is shown in nearly 3% growth in consumption of HRC/Sheets and 12.3% growth in GP sheets. However, this consumption growth has not been achieved by higher domestic availability that has risen by only 3%, while imports have gone up by as high as 28%. Around 11.3% of total imports of GP/Coated sheets fall under the category of coated steel.
However, the import of Galvanised steel (477,290 t) contains imports of 59,000 tonnes of defective GP at an average landed price of `40,400/ per tonne against an average landed price of R59,600/- per tonne for the prime varieties of GP sheets. The use of defective grades of Galvanised steel is likely to bring down the quality of domestic appliances like washing machines, dessert coolers; containers etc. bought by the unsuspecting customers and thereby spoil the brand image of the suppliers. Tin plate consumption has grown by as high as 18% during the period. It is seen that 38% of this import falls under the category of Tin Plate waste waste. It is observed that electricity generation has moved up by 7.6% in August’18 and by 5.8% cumulatively. This has helped the consumption of Electrical steel sheets to grow by a whopping 38% during the first 5 months of the current fiscal. It is worth mentioning that in case of Electrical steel sheets while the domestic availability has gone up by 31%, the import flow has gone up by 24.5% during the period. Out of total imports of ESS, around 54% falls in the category of CRNO steel for which domestic capacities have been created. It would be a stiff challenge before the domestic steel players to develop capacities for production of CRGO steel (46% of the imports) as well as the capabilities to roll out higher grades of CRNO steel which is currently getting imported.
IIP growth and specifically the growth in manufacturing sector has also supported the huge 53.2% growth in consumption of Alloy/SS steel in non-flat segment against a negative growth of 18% in this segment in the previous year. This has been made possible by 42% growth in domestic production, but also by 68% rise in imports. TMT in Alloy/SS grades have been imported of 115,000 tonnes, while Plain Rounds and Wire Rods of 80,000 tonnes and 88,000 tonnes in Alloy/SS grade have been imported. The consumption in Flats of Alloy/SS grade during the period has risen by 10.4% only.
While manufacture of Vehicles has gone up by 12% in August’18 (cumulatively by 18.4%) and manufacture of furniture by 29.2% during the month (cumulatively by 14.8%), the consumption of CRC/S has gone down by more than 12% contributed by fall in domestic availability and imports and exports.
Thus IIP and Manufacturing growth is thus positively contributing to steel consumption rise, but rise in imports in specific categories needs close watch.
The author is DG, Institute of Steel Growth and Development