Construction Industry News
Domestic steel prices are expected to remain around Rs 59,000 per tonne (flat steel) and Rs 56,000 per tonne (long steel) in this fiscal year despite the slowdown in the global economy. Latent domestic demand, rising coking coal prices and production-related dynamics in China, the world's largest steel producer, are likely to prevent this decline.
Domestic demand is expected to grow by double digits for the third consecutive year, supported by spending in the run-up to this fiscal years elections. In the first five months it had already increased 13%. The anticipated concentration of central government capital expenditure (capex) could lead to weakening demand in the second half. Still, Crisil expects demand to grow by 10-12% throughout the fiscal year. This would add to growth of 11.4% and 13.4% in the 2022 and 2023 budgets respectively.
Koustav Mazumdar, associate director of research at Crisil Market Intelligence and Analytics, said the infrastructure segment accounts for around 30% of Indias total steel consumption. In the last five budgets, infrastructure investments (central and state investments combined) have seen a compound annual growth rate of 18%.
The first quarter growth of 60-65% over the previous fiscal year is well above past trends. With annual infrastructure investment growth (centre + states) expected to be 25% in this fiscal, we believe domestic steel demand will be strongly supported. Revival of private equity investment and steady demand for automobiles will further drive growth. All this, amid fluctuating global raw material prices, will keep flat steel prices on average 50% above pre-pandemic levels in this fiscal year as well, he added.
Sachidanand Choubey, Research Manager at Crisil Market Intelligence and Analytics, added that flat steel prices should remain high at Rs 59,000 per tonne in FY2024, and decline only marginally by 2-4% YoY, as well. amid better demand prospects. and the increase in coking coal prices.
Prices are expected to average ~60,000 per tonne in the second half of this fiscal year, up from Rs 58,300-58,500 per tonne in the first half. However, long steel prices may see a steeper decline of 5-6% to Rs 56,000 per tonne despite strong demand, due to cooling costs, especially for thermal coal, Choubey said.
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