Posted on 13 Nov 2015
According to Ind-Ra, the domestic steel sector in the country is likely to witness significant capacity additions to the tune of 12-14 million tonnes per year by end-FY '16. At the same time, steel consumption in the country is not expected to post significant growth during this period, thereby leading to lower capacity utilization. This in turn will impact the prices of finished steel products.
The report published by Ind-Ra notes that global steel industry too faces overcapacity woes with slower-than expected growth in global steel demand and steep fall in steel prices. The agency sees fewer possibilities for speedy recovery of domestic steel sector in the country and a significant upturn in prices of the commodity.
The steel producers in the country have benefited greatly by the sharp fall in iron ore prices. However, steel producers with captive iron ore mines have been badly affected by the government decision to raise mine royalty rates from earlier 10% to 15%. Similarly, fall in coking prices have benefitted blast furnace-based steelmakers in the country. But weak Indian currency has minimized the benefits, as imports account for almost 80-90% of the total coking coal requirements by BF mills in the country.
The blast furnace-based steel mills in the country are seen implementing various upgrades and technological improvements to boost productivity. A full implementation of the enhancement processes could reduce energy consumption by nearly one-third and hike steel productivity by almost 40%. , However, it will take time for these improvements to show effect, Ind Ra report says.
