In The first half of the current financial year, the industrial production in the country has grown 5.1%. This rate could have been higher but for the poor growth in Mining (0.2% in September) and Intermediate Goods (1.4% in Sept). The manufacturing sector has grown by 5.3% cumulatively and lends a fairly good support to steel industry. A few of the steel intensive segments have shown a respectable growth.
While the manufacture of motor vehicles, trailers, etc, has achieved growth of nearly 17% in April- September (commercial vehicles production grew 40.8% in September 2018 contributing 0.3% to IIP growth), the manufacture of other transport (railway materials, ships, barges) has risen 13% and furniture manufacturing has clocked a 25.9% rise.
The production of automobile sector during April-October 2018 has grown 14.4%, with the sales of commercial vehicles (primarily medium and heavy) rising 42.8% during the period. The production of two- and three-wheelers has grown 11.1% and 31.9%, respectively. The overall export of automobile from India during this period has seen growth of 24.1%, with export growth in commercial vehicles, two- and three-wheelers. It has also set a challenge to the domestic manufacturers to produce and market higher tonnages of special high value added cold-rolled (CR) products for the automobile sector.
The domestic availability of CR during the first half of the current fiscal is, however, lower (by 9.4% in comparison to last year)and the production shortfall is mostly from SME CR plants (including narrow-width CR producers) to the extent of around 22%. It points out liquidity crisis and other organisational issues has led to production cuts by the SME plants which includes Bhusan Steel and BS&P, although demand was sufficient and inventory buildup of CR products had come down as compared to the previous year.
A much-reduced exports of CR (by around 50%) could not make up the shortfall in domestic availability and imports of CR at 2,43,000 tonnes in the period was 38% lower than the last year. It can also be noted that a higher tonnage of CR (by 3.0%) has been used for downstream processing (all coated products) which has further cut down the consumption figures of CR products. This, however, does not include stainless steel CR.
Correspondingly, the consumption of galvanised plain/galvanised coil (GP/GC) coated products at 4.3MT has risen by nearly 6.9% compared to last year’s volume. The imports of coated products during the period at 0.639 MT is 19% higher than last year, while the exports at 0.497MT is lower 21% during the period.
While the domestic availability of all coated products at 4.62MT exceeds last year production, there is no reason why the country needs to import 72,000 tonnes of coated products in the defective category. This is the market for domestic manufacturers that have been taken away by the importers of defective coated products by supplying cheaper steel to the unsuspecting indigenous consumer segment, a component of which is not much concerned with the quality of the purchased goods.
Despite a moderate growth of 5.8% by machinery and equipment manufacturing in September, the output of roller and ball bearing has shot up nearly 40% during the month which is favourable for steel industry. What is most satisfying for the steel industry is a steady growth of 9.5% achieved by infrastructure/construction sector in September 2018 and cumulative 8.7% during H1 of the current year. Accordingly, the consumption of TMT Bars in the country has grown by more than 10% during the period.
The rise in other transport manufacturing had a good impact on consumption of railway materials which is marginally down compared to last year. To meet the supply gap, the railway has invited a global tender for nearly 5,50,000 tonnes which indicates the increasing need by railways for rails for gauge conversion, new lines, doubling of the lines in busy areas, rails for DFC. The capital goods, which is the most steel-intensive segment, have grown 7.3% during the six months which is way above 0.3% growth achieved by the sector in the previous year.
It reflects on the higher domestic production of plates which at 2.7MT has gone up 8.5% in H1. The imports of plates have gone down with the rise in exports. The consumer durable segment, which requires flat products and SS steel, has risen 8.1% during the first six months which is immensely better as compared to negative 1.0% growth achieved by the sector in the previous year.
The higher consumption of coated products (by around 7%) has been supported by growth in consumer durable segment. The industrial production in the country must be supported by removing supply constraints of raw materials (steel is primary), including credit availability from financial institutions, curbing imports of defective steel and adequate order flow from large buyers and corporate houses. Exports of industrial products from India have to be given a special thrust by both industry and the government to effectively succeed in ‘Make in India’ programme.
(The author is DG, Institute of Steel Growth and Development. Views expressed are personal)