India Ratings and Research (Ind-Ra) has published its November 2021 credit news digest on India's steel sector. The report highlights the demand-supply scenario, price trends, imports/exports in both India and China encompassing finished steel products (both flat and long), scrap, iron ore, coking coal and others, while also evaluating the impact of end-user industries on India's steel sector. The agency has also covered its recent rating actions.
Global Production to Fall in 2H21
Ind-Ra expects the Chinese crude steel output to be weaker in 2H21 than in 1H21 on account of the strict government measures to curb production. The global crude steel production was at 145.7 million tonnes (million tonnes) in October 2021, 1% month on month (mom) higher but 10.6% year on year (yoy) lower. The lower crude steel production levels yoy can mainly be attributed to China, which recorded a lower steel output of 71.6 million tonnes in October 2021 (September 2021: 73.8MnT; October 2020: 93.35 million tonnes).
The lower Chinese production levels can be attributed to the production curbs and the export rebate cuts implemented in May 2021 to reduce export allocations. As an additional measure, the Chinese government is considering to introduce export duties on steel products, although an official announcement is awaited. The global crude steel production over January-October 2021 was 1,607.1 million tonnes, up 5.9% yoy due to strong Chinese production. India's crude steel production improved 2.4% yoy and 2.5% mom to 9.8MnT in October 2021.
Consumption to Improve in 2HFY21
India's finished steel consumption was 1.1% yoy lower but 8.2% mom higher at 8.19 million tonnes in October 2021. India's steel consumption rose significantly in 7MFY22 to 53.53 million tonnes from 42.14 million tonnes in 7MFY21. An increase in government investments including schemes such as 'Make in India' and expedition of government projects have provided significant growth momentum to construction and infra sectors. The infrastructure, construction, auto, real estate & pipes sectors together account for around 65% of the domestic demand. Domestic finished steel consumption in 3QFY22 is likely to be sequentially higher with the monsoon season being over and improving vaccination rates.