Steel demand in India to grow faster by over 13% this year: World Steel Association
Moneylife Digital Team 03 May 2011

The global body expects strong growth in the use of steel in the country due to its strong domestic economy, massive infrastructure requirements and industrial expansion. Demand in developed economies slowing

Steel demand in India is estimated to grow by an impressive 13.3% to 68.7 million tonnes in 2011 and still higher by 14.3% next year on strong domestic growth, massive infrastructure needs and expansion of industrial production, according to the World Steel Association (WSA). Steel demand in the country grew by about 10% last year.

 In its 'short range outlook' for the steel business published recently, WSA estimated global apparent steel consumption to increase by 5.9% to 1,359 million tonnes in 2011, and in 2012 this could grow by 6% to a record 1,441 million tonnes. Last year, steel demand grew by 13.2%.

"This year is the final year of the 11th Five-Year Plan and the government will emphasise on completing infrastructure projects. Taking this into consideration, steel demand would get momentum this year," Ravindra Deshpande, analyst, Elara Securities, told Moneylife.

Developing economies will be the frontrunners in steel consumption going forward as steel use in these economies is expected to be 38% more than in 2007, whereas in the western world steel use will be 14% below the 2007 level.

"2010 saw a steady recovery of steel demand, which began in the second half of 2009 driven by stimulus packages globally, the resilience of emerging economies and an overall market recovery. In 2011, we expect to see a further 5.9% growth in world steel demand," said Daniel Novegil, chairman, WSA.

The association said that its forecast is based on a stable and steady recovery of the world economy, and it warned that recent events such as unrest in the MENA region, financial fragility in Europe, and the massive earthquake and tsunami in Japan would have a negative impact on economic recovery and thereby affect steel demand.

China, the world's largest steel producer, should maintain consumption growth of 5% at 605 million tonnes in 2011, following a 5.1% growth in 2010. WSA also said that given the pace of steel production in China, in the January-March quarter this year, the country's steel use could be even higher. However, the Chinese government's steps to cool down the real estate sector would impact steel demand by the end of this year.
Japanese steel consumption is also likely to slip by 1.2% to 63 million tonnes in 2011 as stimulus packages expire. However, WSA said that it was too early to predict the impact of the earthquake and tsunami. The US market will also see a growth by 13% to 90.5 million tonnes this year, due to the second round of quantitative easing and new fiscal policy initiatives that boost economic activities and sentiment in industrial and energy markets.  However, the construction market is expected to remain depressed in the US.

The European Union's steel consumption would increase by 4.9% to 152 million tonnes in 2011 on the back of an export-driven industrial rebound. Germany and France will see considerable growth in steel consumption due to growing demand from the countries' auto and machine-building sectors.

A major factor that could upset demand projections is the increasing prices of steel due to surging input costs. For example, April-June coking coal contract prices were sealed at $330 a tonne compared to $225 a tonne in the fourth quarter of 2010. However, analysts suggest that companies would rather absorb the increased input costs than pass on the higher costs to consumers and this would put pressure of margins.

Higher inflation, too, should not have much effect on demand, experts feel. "The growing concerns over inflation would affect pricing trends in steel, but it won't affect demand so much," an analyst with a Mumbai-based research firm said.

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