India New Steel Policy 2017 to increase steel consumption
Business Line reported that there is some good news for steel producers around the world after years of wait characterised by slowing demand, excess capacity and large inventory. After facing headwinds that slowed consumption in recent years, world steel demand growth is beginning to face a cyclical upturn. Consumption demand is expected to pick up on the back of the momentum in global economic growth.
Based on the demand conditions so far this year, the World Steel Association, in its short-range outlook, has forecast that global steel demand will reach 1,622 million tonnes in 2017 and will improve to 1,648 million tonnes in 2018.
In other words, the industry has by and large been able to ride out this year’s political risks, including Fed rate hikes, European elections, rising crude oil prices and Trump-induced market volatility. Admittedly, China is the mover and shaker of the world steel market by virtue of being the largest producer and consumer of the industrial metal.
China accounts for about 45% of world demand. Its steel demand in 2017 is forecast to grow 3%. Excluding China, steel demand is expected to expand by 2.6% to reach 856 million tonnes in 2017 and by 3% in 2018 to 882 million tonnes.
The positive correlation between global economic growth and steel consumption is well-recognised. From less than 3% in 2016, there has been a modest pick-up in global growth to 3.3% this year and a further increase to 3.6% in 2018 is seen. For the world market, at present, risks factors include geopolitical tension (friction between the US and North Korea), protectionist tendencies and China’s debt problem.
The Chinese steel industry has been facing environment-related issues as well as trade friction.
The big question everyone is asking is: who will replace China as the world’s growth engine for consumption. Over the last two decades, China recorded phenomenal growth in steel production and consumption.
The Asian major’s growth has been driven by investments, led by heavy investments in the construction sector, including infrastructure, housing and commercial premises.
Will India emerge as the next China in terms of steel consumption? Not anytime soon perhaps; yet, indications are that India’s steel consumption in the coming years will register robust growth on the back of the government’s thrust on infrastructure development, real estate and automobiles.
In the 2017-18 Budget, an outlay of INR 4 lakh crore for infrastructure expansion, covering railways, roadways, airports, seaports, multi-modal transport and urban amenities, as well as affordable housing to ease dwelling house shortage was made. This has provided a shot in the arm for the domestic steel sector. It is widely believed that an increase in public investment will crowd-in private investment.
The New Steel Policy, 2017, envisages an increase in per capita consumption from the present 60 kg to 160 kg by 2030 backed by a target of 300 mt steel making capacity. The big challenge will be finding funds for capacity expansion. Where will the INR 10 lakh crore come from?
Source : Business Line