The Indian Steel Association (ISA) anticipates robust finished steel consumption in 2021 driven by healthy demand from the construction sector — including infrastructure and real estate — which accounts for 62pc of the total steel demand in the country.
The government has infused financial stimulus and production-linked incentives while has allowed secondary steelmakers to supply steel by participating and competing in the government tenders along with primary steelmakers to make a level playing field.
Along with this, recovery in the automobile and consumer durables sectors — that account for 9pc and 6pc, respectively — is expected to continue in the first half of 2021 as pent-up demand will speed up production, the association noted. Sectors like capital goods, construction machinery, electrical machinery, and mining equipment make up for about 10pc of steel consumption.
The railways contribute about 7pc to India’s overall steel usage and could see a robust recovery in the coming years.
The remaining 6pc is contributed by the intermediary or packaging sector, which, in turn, depends on both the auto sector and exports. Demand from the packaging sector will rise to over 6mn mt levels seen in 2019 as per the government data
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Arnab Hazra, Deputy Secretary-General of the ISA and a noted economist, said there could be over 22pc recovery in steel demand in 2021 surpassing 100mn mt again on recovering economy. Consumption of finished steel in India had reached 102.6mn mt in 2019. Demand dropped due to the pandemic lockdowns to 81.9mn mt in 2020.
Dr. Aruna Sharma, former Secretary of Steel, said that with the rising manufacturing, improvement in capacity utilisation, the opening of coal and iron ore mines and stabilizing raw material prices, all-steel manufacturers could speed up their expansion and acquisition plans. Steel manufacturing capacity will increase from a decent 142mn mt to 175-200mn mt in the coming three years, Sharma noted.
Challenges
According to ISA, the steel industry is likely to face some trade challenges in 2021. Input costs have been affected by high logistics costs, high finance costs, and taxes outside GST including royalty, District Mineral Fund, Electricity Cess, and Clean Energy Cess. According to a recent release from the Niti Aayog, in addition to the high logistics and finance costs, Indian steel mills pay over $100 in such levies compared to other nations worldwide.