Steel consumption dips

Mumbai : Capacity addition and increased Chinese imports may put pressure on prices.The steel sector seems to be the newest victim of slowing demand. In April, steel consumption grew by two per cent year-on-year, as against FY12 estimates of 10.7 per cent. From the look of it, things may not be any better in May and June.

According to a report by HSBC Global Research, at 5.4 mt, steel production was up five per cent on year in April, while real consumption rose just two per cent. Imports too declined 61 per cent to 0.3 mt. Exports, at 0.32 mt, were up 45 per cent.

The situation looks unlikely to reverse in the near-term. The construction sector in developed markets continues to be weak, almost four years after peaking in 2007. Led by high interest rates and policy-issues, growth rates for industrial capex and construction spending are slowing down in recent months/quarters in India.

While demand for steel here is slower than expected, China’s production of crude steel in April 2011 is at its highest since January 2001 on a daily rate basis . As if slowing demand in India and increased production in China was not bad enough, additional capacity being put up by Essar Steel (3.5mtpa), JSW Steel (3.2 mtpa) and Tata Steel (2.9mt), could put further pressure on domestic steel prices.