By K Raveendran
India is the world’s second largest steel producer after China. But in terms of per capita consumption of steel, India’s number is only about one-tenth of China’s. Steel consumption is considered a highly reliable index for a country’s development status.
Yet, India is emerging as a source of hope for the global steel industry, which is facing considerably uncertainties in view of a worldwide threat of recession and fall of demand in China due to disruptions in construction activity. The new surge in the pandemic is further aggravating these fears. The global steel industry is, therefore, looking towards India for an improvement in the industry’s sagging fortunes.
Plans for the massive expansion in the development of infrastructure is expected to boost steel consumption in India, which is expected to increase demand by 6.7 percent in 2023, according to estimates by the World Steel Association. This will be the highest growth for any country. In terms of steel demand, India has just outstripped the United States in the number-two position after China. The US has now dropped to the third place.
India, which meets much of its steel demand from domestic production, however, also imports significant quantities to take advantage of the price differences. In this respect, the domestic producers are worried about the downtrends in the global industry, which hasn’t had a good year in 2022. With recession concerns swirling, consumer confidence waning and demand softening, the year has been anything but easy for the industry. Also, prices for a number of headline products – from hot-rolled steel to ferrous scrap to pig iron – have been in a steady decline following a rapid runup in the early part of the year.
According to the industry, the end of 2022 and the beginning of 2023 look blighted with uncertainty due to high energy costs, inflation and a new green deal. Reported steel production fell back under 150 million tonnes in November for the first time since February as China’s recent recovery lost momentum, according to Rystad Energy. The seasonal revival in most northern hemisphere markets continued, however, limiting producers’ ability to raise prices and even as, compared to a year ago, steel production outside of China is still some 10 percent lower.
Export prices from China have slid slightly over the past month as mills have been looking for sales, seeing slack domestic demand and the need to push volumes. Lower raw material costs have also facilitated a fall in prices. Although the Chinese government has started easing restrictions recently, new record covid cases may spur more stringent curbs again, and the downward trend in steel-making raw material costs may continue in the short run.
According to reports, billet prices in China have slightly increased recently amid hikes in futures prices. Consequently, Chinese exporters are expected to be less aggressive in giving offers to foreign customers amid some recovery in billet prices coupled with the increased strength of the Chinese currency against the US dollar. At the same time, Japanese exporters continue to increase prices on strong buying interest, despite falling raw material prices.
Export demand is increasing globally while supply remains very tight. The lower raw material prices combined with the weakness of the Japanese yen against the US dollar may limit the price increase in the coming months. Analysts expect offers from Japan to stay steadily high or rise slightly in the coming months to meet the profit targets of Japanese manufacturers.
Indian producers are worried about the flood of cheap imports as demand dries up in traditional steel producers. China accounted for more than a quarter of imports in October, while some Russian steel is also reaching India, according to official sources.
This has to be seen in the context of a flurry of activity in the domestic industry for capacity addition. ArcelorMittal Nippon Steel, a joint venture between Mittal and the Japanese producer, has plans to more than triple capacity to 30 million tons in the coming decade. Similarly, South Korean steelmaker Posco Holdings and the Adanis are also exploring setting up new mills. (IPA Service)