The Indian steel story, contrary to that of Europe and North America, is not that of subdued demand, but of suppressed desire.
All of us are keenly aware of the financial crisis of the Western world which has had a major negative impact on growth and so also on steel demand, but for India, the best explanation for the meager growth reported in its crude steel production by the global steel body, the World Steel Association (WSA), is of uptake curbed by ever-worsening conditions on the ground.
Last week, the WSA reported that that crude steel production in India had registered a 0.9 percent year-on-year growth in India, as compared to the global production rate of 1.9 percent or 132 million tons. For June 2013, India manufactured 6.45 million tons of steel as against 6.39 million tons in the same month last year.
In India’s case, the global economic downturn is only part of the problem.
Most of the growth pace has also been affected by a combination of policy paralysis, legal problems, the throttling of iron ore supply and now soaring inflation to boot. So, as compared to its neighbor China, where infrastructure is still growing at good speed, India finds itself in that peculiar position where demand for steel exists, albeit latently, but a resurgence in the sector can be brought in only if certain blockages were cleared.
In fact, the last quarter saw India’s steel consumption increasing at the slowest pace in the last five years. Even then, going by the laggardly manner in which steel production has been growing in the country, the WSA has recorded that India’s steel performance for the first six months of 2013 was better than the world average, clearly underlying the sector’s potential.
The country posted a 2.5 percent growth in steel production to 39.63 million tons in January-June 2013 against 38.68 million tons in the same period in 2012. In the same period, world crude steel production was 789.8 million tons, an increase of 2 percent compared to the same period of 2012.
But will this continue? Continued in Part Two.
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