JSW Steel expects domestic steel demand to grow by about 6 per cent in 2016-17, adding that the long-term outlook for the sector continues to be bright.
“Despite temporary challenges, country’s long-term outlook for steel sector continues to be bright. India’s steel sector has now risen to be the third-largest producer of crude steel in the world and we expect the domestic steel demand to grow by about six per cent in FY17,” JSW Steel Chairman and Managing Director Sajjan Jindal said in the company’s annual report.
He also said that the government is aiming to scale up the country’s steel production to 300 million tonnes by 2025.
Despite multiple headwinds, the country produced 89. 8 million tonnes (MT) crude steel in 2015-16, an increase of 0.9 per cent. In FY16, the country consumed 80.5 MT of finished steel, registering a growth of 4. 5 per cent.
Jindal pointed out that recent government measures are expected to boost the steel industry’s growth. The Ministry of Steel is facilitating setting up of an industry-driven Steel Research and Technology Mission of India (SRTMI) in association with public and private sector steel companies to spearhead R&D activities in the iron and steel industry with an initial corpus of Rs 200 crore.
Government also plans to auction eight coal blocks with reserves of 1,143 MT to steel and cement firms. It has planned special purpose vehicles (SPV) with four iron ore rich states of Karnataka, Jharkhand, Odisha and
Chhattisgarh to set up plants having capacity between 3 and 6 MTPA.
In the Union Budget 2016-17, the government has also proposed to spend Rs 2,18,000 crore on roads and railways.
The country’s automobile industry witnessed a rebound in demand among emerging economies. Such a scenario augurs well for the domestic steel sector, he said. Other government initiatives, such as housing for all by 2022, power for all by 2019, 100 smart cities by 2022 and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) are likely to drive steel demand significantly, Jindal said.
During 2015-16, India was the only major steel consuming market globally which saw a demand escalation. However, the country suffered from an unprecedented and unfair inflow of steel imports from China, Japan, South Korea and Russia. These countries continued to sell their surplus steel production at predatory prices, he added.
South Korea and Japan benefited due to the free trade agreement with India. As a result, the domestic industry was forced to take a series of price cuts, leading to a severe margin squeeze for domestic steel companies, Jindal said.
He said that the government has also taken relevant steps to bolster the growth of the sector. The objective was to provide a level playing field to the domestic steel industry.
To curb imports, the government enhanced customs duty and introduced the minimum import price (MIP) mechanism at prices below marginal cost from exporting nations.
JSW aims to touch 40 MTPA capacity in the next decade. The company is looking at higher volumes and improving margins. It is confident of improving profitability and strengthening cash flows in the coming years, Jindal said in the report.