(MENAFN- KNN India) Lower input costs and improvement in domestic realizations due to reduction in imports could be the laying stone for gradual recovery in Indian steel industry, said Care Ratings in its report.
The report further said that the Indian steel industry has been struggling over last couple of years due to rising imports particularly from China, relatively subdued domestic demand, excess domestic capacity and decline in realizations due to availability of cheaper imported steel.
However, there have been some positive developments in recent times with government intervention in the form of imposition of minimum import price (MIP) in February 2016 for a period of six months and levy of 20% safeguard duty in September 2015, which has been further extended till March 2018.
These measures have arrested the rise in imports to a large extent thereby leading to improvement in realizations for the domestic players. Furthermore, the lower prices of key raw materials have also supported the improvement in realizations of steel products, it said.
The continuation of protection measures for some more time and sustained revival in the demand would remain crucial for the prospects of domestic steel industry in the medium to long-term.
The domestic finished steel consumption grew by 4.3% in FY16 as against a growth of 3.9% during FY15. Looking at monthly data, the growth rate of 3.7% in finished steel consumption in March 2016 is attributed to improved demand with infrastructure industries growing at 6.4% in March 2016 as against 2.9% in January 2016
Report also said that after continuous decline, the global steel prices have strengthened largely driven by increase in prices in China which is considered to be on account of production cuts and restocking for meeting the demand of peak season in Q2CY16.
The price differential between imported steel and indigenously produced steel post implementation of MIP provides the much needed headroom to major steel producers for increasing prices between Rs.3,350 and 5,025 per ton depending on various types of the product. (KNN/AR)