India may add 30MT steel capacity to turn net exporter

Steel export from India is likely to be around 5 MT in FY'13. This will go up to around 7.5 MT in 2013-14,it said.

Steel imports may be a thing of past,as the domestic industry is set to add around 30 million tonnes capacity over the next 18 months,making the country self-reliant and putting it in net exporters’ league,says an IDFC Securities survey.

The proposed capacity addition would outstrip cumulative 9.5 million tonnes (MT) demand growth and net import substitution of around 5 MT over the next one and a half years,the survey said.

“We expect incremental capacity addition less of a concern for major players in FY’12. With a delay in commissioning of 3.2 MT of JSW Steel capacity at Vijaynagar,we expect domestic steel demand to outstrip supply in FY’12. India would possibly turn a net exporter of steel from FY’13,” the brokerage firm said in the survey.

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Steel export from India is likely to be around 5 MT in FY’13. This will go up to around 7.5 MT in 2013-14,it said.

India is believed to have consumed over 70 MT in 2010-11 and the demand for steel is likely to clock a 10.2 per cent compounded annual growth rate (CAGR) over four years starting from FY’10,it said. On the other hand,production may grow at 11.5 per cent CAGR in the corresponding period.

Of the proposed 30 MT capacity addition,21 MT would be added by the top players like SAIL,Tata Steel,JSW Steel and Essar Steel,it said,adding that bulk of the addition would be flat products,which find application in the auto sector.

“Given that flat products face threat of Chinese imports,the incremental capacity addition would further exert pricing pressure,” it said.

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IDFC Securities said sales volume of the steel firms were hit during April and May by dealer de-stocking and the same was also likely to continue in the current month.

“Demand is weakening. Investment-led demand has consistently remained weak over the last several quarters. Consumption-led demand growth is also showing signs of weakness.

“Unless longs demand improves in H2 FY’12,we expect steel demand in India to grow by just 5-6 per cent against the earlier general estimates of a double-digit growth,” it said.