The catastrophic year 2020 after creating one of the greatest challenges of the century came to an end reversing the hopelessness with lots of positivity. The feel-good period, however, appears short-lived as the second wave of the pandemic is ravaging some parts of the country and threatens to spread at a supersonic speed the remaining states of the country. Speed in vaccination covering the vulnerable sections, while maintaining all possible mandatory precautions against the disease remains the only solution left to fight the menace. Events that would take shape in the next fortnight would only tell if 2021 would be a better year than 2020.
The Indian steel industry like its global counterparts belongs to one of those core industries that along with cement, renewable energy, coal and petro-chemicals is looking forward for a steady growth in 2021 onwards. In this context, the short range outlook for steel by WSA indicates a 6.1% growth of global steel demand at 1,874 MT, with china topping the list as usual with a predicted level of 1024.9 MT of steel consumption (54.6% share of global demand), at 3.0% growth over 2020, followed by India clocking growth at 19.8% of steel consumption at 106.1 MT in 2021. The US is slated to consume about 86.5 MT of steel with a growth rate of 8.1%.
All other major steel producing countries have been projected to consume more steel in 2021. Japan with 56.0 MT, South Korea with 51.5 MT, Russia with 43.8 MT, Germany with 34.0 MT and Turkey with 35.0 MT are some of the top-ranking steel consuming countries. It is interesting to note that developed countries, where steel consumption was set to reach a near plateau level, would together demand 8.2% more steel in 2021, while emerging economies excluding China is likely to clock a growth of 10.2% in steel demand. The CIS, Central and South America and Africa would have a comparatively slower growth of 6.8%.
The traditional demand driving sector for steel continues to be construction, which with the help of real estate construction and infra stimulus that have been announced by almost all the countries to prop up their economies immediately after the pandemic, would play a stellar role in strengthening steel demand. The demand for logistic-related facilities to support e-commerce, along with green recovery programmes and infra renewals, would play their part.
In India, the transportation of clean drinking water to cover each household in the country, LPG gas supply through pipes and transportation of oil and gas have been identified as key action areas.
The automobile sector that accounts for a much larger share in steel consumption in the US, the EU, Japan and South Korea (22-25% against 9% in India), is poised for a growth after sliding down in last three years. The Covid 19 pandemic has brought about a thrust on owning personal vehicles as opposed to public transport. Shortage of semiconductors may pose a risk in supply chain management. Passenger cars, light and medium commercial vehicles and tractors are selling at a high rate in India to reflect rising rural income and demand.
A number of mega government schemes in India like Jal Jiban Mission, PMAY-G & U, Bharatmala and Sagarmala provide good prospect for public investment, while projects like dedicated freight corridor, Metro railways, Ujala, port modernisation, new airports, renewable energy and irrigation projects would demand massive volume of steel that can be mostly supplied indigenously.
The indian steel industry needs to enhance intensity in each of these segments by making available standard designs in steel that can be immediately implemented. The penchant for Atmanirbhar Bharat and renewable energy would lead to higher demand for indigenous manufacturing of steel contained engineering goods by replacing imports.
Steel exports by India reached a record level of 17.4 MT in FY21 (including 6.6 MT of semis) which exceeds last year’s level by as high as 55.5%. Vietnam has received maximum Indian steel exports, followed by China (semis export), Italy, the UAE and Nepal. India has become a net exporter by a big margin as total steel imports at 5.04 MT is 29.6% lower compared to last year.
India has imported maximum from South Korea, China, Japan and Taiwan. Large volume of HRC imports from South Korea was undertaken to feed the Korean service sectors’ demand.
These imports are expected to be replaced by domestic supply. Total imports valued at Rs 63,038.9 crore in FY21 was much lower compared to the export proceeds (all items inclusive) earned by the country at Rs 91,545.5 crore.
(Views are personal )