Slowdown in Consumption Puts Brakes on Indian Steel Demand Growth

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Indian steel end-user demand continues to slow, with researchers estimating domestic steel demand will grow at a subdued rate of 2% to 4% in 2013-14.

Many construction and infrastructure projects have not taken off as expected, due to execution delays caused by environmental clearances. Slowing economic growth also has put the brakes on consumption-driven sectors, such as automobiles and consumer durables.

While near-term demand is expected to remain muted, long-term prospects are forecast to be steady. Steel demand in India is expected to pick up from 2014-15, with demand in key end-user sectors such as construction, infrastructure and automobiles. Growth demand will be lower when compared with the robust growth rate of the last decade.

Domestic steel demand growth is estimated at 6% to 7% compound annual growth rate (CAGR) between 2013-14 and 2017-18, compared with a CAGR of about 9% during the last decade. At this rate of increase, steel demand in India will touch 93 million tons to 94 million tons by 2017-18.

Since incremental demand for finished steel is expected to be considerably lower, the demand-supply gap will widen, when the majority of the planned new capacities are scheduled to be commissioned, according to CRISL Research. The widening gap will encourage, even compel, steel manufacturers to increase exports to arrest the expected fall in operating rates. However, the demand-supply equation globally is not favoring domestic steel manufacturers.

A shift in China's focus from investment to consumption, accentuated by weak economic conditions in mature developed countries, will force a deep structural slowdown in global steel demand over the next five years.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.