Indian steel industry: Tapered now, tempered for the future, thanks to changing dynamics.

The year 2022 has been a period of major ups and downs - not only for the global equity markets but also for the global economy. With the central banks giving top priority to control inflation even at the cost of economic growth, the global economy paints a gloomy picture for the near future. Some sectors have been hit harder in the wake of the impending demand slowdown.

The global steel sector is one of them. It faced a 4 percent on-year contraction in global steel production, driven by a 2 percent fall in production in China and 7 percent in the rest of the world.

Data shows that apart from China, production in other key regions, such as Europe, too declined 10 percent on-year and the US witnessed a decline of 5 percent. On the other hand, India and the Middle East witnessed a year-on-year growth of 5 percent and 7 percent, respectively.

“Although any sharp production growth is unlikely in CY23, it should be in the range of 1.5-2.0 percent with another healthy year for India and likely turnaround in Europe and North America,” it is said, the Director-General of the World Steel Association (WSA) at an event.

Basson believes that India’s steel industry is better placed than its peers in other countries and should witness the strengthening of fundamentals, driven by better domestic demand, increased export opportunities, limited imports, and firming up of steel prices at healthy levels.

The fact that the exports from China have fallen considerably from the peaks of 2016, the likely closure of 150 million tonnes (MT) of production capacity there will keep the exports from China in a tight range. This would result in a renewed focus on its domestic market and push back the exports.

This is where the Indian steelmakers stand to gain. Even though India may not be able to replace China as the top producer and consumer of steel, its vast domestic market will provide ample scope for growth for domestic steel makers.

Basson is of the opinion that apart from the strong support from domestic demand, the Middle East and Southeast Asia would be key targets for India’s steelmakers for exports in the next 5-7 years.