Steel imports to remain a hot issue for India
Resource from: Business Standard Likes:157
May 07,2013
Overcapacity and production more than the market can absorb at rates remunerative for suppliers have remained principal concerns for the world steel industry since the 2008-09 global financial meltdown, the members of which still keep flying. In the first quarter of this year, the world steel production at 388.696 million tonnes (mt) clocked a growth of 2.3 per cent over the corresponding period of 2012. In contrast to growing production restraints in most parts of the world, Asian steel output in the first three months of 2013 advanced on a year-on-year (y-o-y) basis by 6.4 per cent to 259.8 mt. The speed at which China built steel capacity has left the rest of the world bewildered. Once again the progress in Asia's production so far this year is largely on account of the world's second largest economy.
China's production growth when steel prices remain under pressure and capacity lay off in particularly high-cost centres continues, is not endearing the steel goliath to others. The first quarter steel production in the European Union was down 5.4 per cent to 41.5 mt, while North American output slid 5.7 per cent to 29.7 mt. This led an official of consulting firm Wood Mackenzie to tell Reuters that "most of the world is in decline, but the steel industry in China isn't disciplined in the way Europe might be". He thinks with Chinese production remaining "persistently high," steel prices cannot but remain under pressure leading to margin erosion for producers everywhere. The issue is why should China be courting criticism of other producing nations and still stick to growing steel production. Moreover, near-term industry outlook is not at all encouraging. An official of ArcelorMittal credits China for building a "fearsome low-cost steel industry". At the same time, some spirited house cleaning operation notwithstanding, the Chinese industry is still left with a good amount of high cost and polluting capacity.
That China supports its steel industry and steel products exports by way of subsidies is widely known and resented. The subsidy issue comes to the fore at regular intervals as China will have scrap with countries alleging dumping of steel products by it to the detriment of local producers. What, however, should not be lost sight of is that an industry with China's capacity is a massive provider of employment in steel mills, upstream mines, downstream value-adding enterprises and tertiary sectors. More than half the steelmakers in China are government owned. Neither Beijing nor the provincial authorities are ready to risk economic disorder and social unrest by withdrawing life-sustaining government support to steel mills. The ArcelorMittal official says, "We are mesmerised by China, but if you look at its steel industry, despite its rise, 92 per cent of steel companies are trading at a loss." Rising cost of energy and finance is steadily robbing Chinese industry of the status of a low-cost producer. Steel mill wage bill too, is spiralling. And this is happening when world steel demand grows slowly.
In case China sustains steel production at the first quarter rate, then it will end the year with an output of 768 mt against 716.5 mt in 2012. In its short range outlook, World Steel Association says steel use in China in 2013 should rise by 3.5 per cent to 668.8 mt. This is to leave China with an exportable surplus of nearly 100 mt. A point of concern for India, which already is a net steel importer: We should also keep an eye on Japan where softening of yen has significantly improved export competitiveness of its steel. At the same time, "conditions in Europe will remain under pressure in spite of acceleration in production discipline. We, therefore, expect southern European steelmakers to increase their presence in export markets," says an analyst with Metal Bulletin. In this context is to be seen SAIL Chairman Chandra Shekhar Verma's observation that "Steel imports will remain a hot button issue for India as long as the world will have much surplus capacity and producers in many places will be in some desperation to export extra metal with them."
India's March steel production at 6.86 mt shows a y-o-y rise of 6.5 per cent. However, production rise in this year's first quarter at 19.826 mt was 2.8 per cent more than in the corresponding period of 2012. Production rises here are due to more and more capacity coming on stream from new projects and existing mill expansion. In fact, this will remain the trend as the country targets a steel industry of the size of 180 mt to 200 mt by 2020. As we go forward, large capacities on account of SAIL, Tata Steel, Vizag Steel and others will get commissioned in close proximity. But will local demand be growing at a rate to ensure that the steel industry will not at any stage be left with much surplus capacity. To go by the observations of Tata Steel Managing Director Hemant Nerurkar and SAIL's Verma, steel demand in an emerging economy with its focus on infrastructure development should be more than tracking the gross domestic product (GDP) growth rate. A six per cent GDP growth in 2013-14 should, therefore, translate into Indian steel use growing at double last year's 3.3 per cent.
(Business Standard)
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1.The news above mentioned with detailed source are from internet.We are trying our best to assure they are accurate ,timely and safe so as to let bearing users and sellers read more related info.However, it doesn't mean we agree with any point of view referred in above contents and we are not responsible for the authenticity. If you want to publish the news,please note the source and you will be legally responsible for the news published.
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