Steel production target tough to meet, says Crisil

15 May 2017

The government’s ambition to add 182 million tonnes of new steel capacities over the next 14 years under the National Steel Policy is unlikely to be achieved, rating agency Crisil said in a report

Only 60 million tonnes of capacity has been added in the past decade and stagnant demand in the past five years had aggravated the debt position of the sector, it added. Several global steel majors such as POSCO and ArcelorMittal have scrapped various Greenfield steel projects, owing to land acquisition and raw material linkage issues, the report said.

“Crisil Research expects 24-26 MT of steel capacities to be added over the next five years, leading to aggregate steel capacity to rise to 140-145 MT by 2021-22,” the report said. “Beyond this, the trajectory of demand growth, continued government support, and pricing environment in backdrop of global over-capacity led by China would be key determinants of pace of capacity addition.”

The ratings agency has also projected a 6-6.5% growth in steel demand in India over the next five years, lower than the 7% annual growth rate projected by the government till 2030.

“A similar trajectory of growth is expected to continue even in long run, subject to continuation of government’s initiatives,” the report added. “Also, the policy is expected to encourage in-house production of flat and alloy steel products, reducing their share in overall imports.”

The National Steel Policy, launched on May 3, seeks to increase steel consumption across the major sectors, including infrastructure, automobiles, and housing, resulting in a potential increase in per capita steel consumption to 160 kg by 2030 from about 60 kg at present.

The policy also envisages achieving 300 MT of steel-making capacity by 2030 through additional investments of ₹10 lakh crore by 2030-31, and to reduce reliance on imports to nil and develop steel exports of about 24 MT by 2030.

“Even in its NSP 2005, it had envisioned exports to touch 26 MT by 2019-20,” the report said. “However, low cost competitiveness in global markets, and over-capacity in China, led exports to stagnate at around 5 MT over the past decade or so.”

“In 2016-17, there was a recovery, as numerous trade barriers on Chinese steelmakers and muted domestic demand saw exports rise 102% to touch 8.2MT,” it added. “However, in the long term, with markets getting more concentrated, and looming risk associated with over-capacity in China, we expect exports to stay range bound between 8-10 MT.”

Source – thehindu