Steel sector in cold storage

Mumbai : Demand for steel has hit the slow lane. Poor order inflows dragged demand growth to 3.1 per cent in the second half of FY11 but this improved to eight per cent in the fourth quarter. The sluggish demand is expected to continue in the near-term.

The strike at Maruti Suzuki’s Haryana factory, coupled with muted order activity from Indian Railways in the wake of assembly elections in West Bengal, made matters worse. These events acted as catalysts to the existing headwinds of rising interest rates and inflation, which have reduced project capex over the past five months.

A section of analysts believes that fresh capacity would add to pressure on prices. With the commissioning of 3.2 million tonnes of capacity by JSW Steel and five million tonnes by Essar Steel, the brownfield expansion has started to come through. There are further expansions (2.9 million tonnes of capacity by Tata Steel, two million tonnes by SAIL at Burnpur and three million tonnes by JSPL) lined for completion in FY12.