India’s steel sector struggled in 2019 — but what does 2020 hold?

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For Indian steel producers, 2019 was an unremarkable year.

Like some of the previous years, the steel sector slumped throughout the year, save for the last two months.

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Globally and domestically, the steel industry witnessed a steep price fall not seen in the past three years. For example, prices of hot-rolled coil steel fell for 21 straight weeks; only toward the end of 2019 did some steel companies raise the price of steel products.

Rising steel imports, drop in coking coal imports

Production-wise, Indian steel makers continued to face the challenge of imported steel flooding the market. This, and the lack of pickup of steel, led to some companies reducing their steel output. In October, India had reported a 3.4% drop in crude steel output at 9.09 million tons, against 9.41 million tons in the same month the previous fiscal year.

One indicator of reduction in steel output was the drop in coking coal imports in November, which declined by 14.52% to 3.61 million tons against 4.22 million tons  in the same month last fiscal, according to a report by Iman Resources. A report in MoneyControl said the country’s crude steel production in November was down by 2.8% to 8.9 million tons, compared to production in November 2018.

The country’s crude steel production in November was down by 2.8% to 8.9 million tons, compared to the production figure of November 2018.

Looking to the future of Indian steel

So, what does the immediate future hold for steel in India?

A majority of steel producers and analysts are positive Q4 of the fiscal will show a rebound. What gives them hope is the Indian government’s announcement to put fresh investment into the country’s infrastructure.

A few days ago, the government unveiled the multimillion-dollar National Infrastructure Pipeline (NIP), with projects spread across 18 states over the next five years.

From fiscal year 2020 to fiscal year 2025, sectors such as energy (24%), roads (19%), urban development (16%) and railways (13%) will take up around 70% of the projected capex.

To achieve a U.S. $5 trillion economy by fiscal year 2025, India needs to spend about $1.4 trillion on infrastructure.

The endeavor of the NIP aims to make this happen in an efficient manner, India’s Finance Minister Nirmala Sitharaman told reporters in India.

This fresh investment in power, railways, and water, coupled with renewed interest in the automobile sector is bound to bring in fresh demand for steel, analysts say.

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At the start of fiscal year 2020, the steel industry’s estimated consumption growth was pegged at 7%, which was in line with the demand seen in the last two years of about 7-8%. Steel analysts feel the worst is behind them, and the new year will start off on a more positive note.

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