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Steel production likely to remain higher in 2017-18: Report

LiveMint logoLiveMint 19-02-2017 PTI

Mumbai: The country’s steel production and consumption is likely to remain higher in 2017-18 from 89.79 MT of crude steel during 2015-16 backed by an increase in infrastructure allocation in the budget, a report said.

In 2017-18, steel production is expected to remain higher. This will be backed by an expected revival in consumption. An increase in infrastructure allocation by the government in the Union Budget 2017-18 is expected to drive the pace of construction and infrastructure in the country, Care Ratings said in its report.

The National Steel Policy 2017, released by the government, also aims to increase steel production. Thus, both production and consumption of steel is expected to remain buoyant in 2017-18, the report said. The country has gained the position of third largest crude steel producer in the world and is largely focusing on increasing production. However, focus at the same time should be on increasing consumption of steel and reducing the dependence on cheap imports.

The government had supported the industry in 2016 by providing protectionist measures. But the protection cannot be expected to last forever and the industry has to gear itself to face competition in the normal course, Care Ratings said. In 2014-15, India surpassed the US to become the third largest steel producer in the world. India continued with this position in 2015-16 as well. The country produced 88.97 million tonnes and 89.79 million tonnes of crude steel during 2014-15 and 2015-16, respectively.

Steel production in the world is dominated by China followed by Japan. During 2015-16, crude steel output of China stood at 789.04 MT and for Japan it stood at 104.23 MT. In 2016-17, production of these steel producing countries (excluding India) remained subdued even during April-December 2016 on a y-o-y basis. While crude steel output in China, Japan and Russia grew by mere 0.5-3%, output in US remained flat and that in South Korea declined by 1.3%.

In contrast, crude steel production in India rose by 8.8% to 72.35 MT during this period. This was on account of higher output by the major Indian steel companies. The imposition of Minimum Import Price (MIP) encouraged the producers to increase their output. Care Ratings said that the consumption of steel, on the other hand, grew by just 3.2% to 73.75 MT during April-December 2016.

Post-demonetisation, steel consumption is expected to remain under pressure in the coming few months to a certain extent. This is because it is likely that the demand for steel from the user industries like construction, real estate will take some time to strengthen. However, government push towards infrastructure will compensate for this reduction in demand, it added.

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