India’s steel consumption growth is likely to slow down for its financial year-ending March 31, 2020, as its domestic downstream industries face weaker demand for their end-products.
Steel consumption for April-July amounted to 33.706 million mt, about 6.6% higher than the 31.607 million mt recorded a year ago, data from state-run Joint Plant Committee showed.
The 6.6% rise was less than the year-ago growth. April-July 2018’s consumption was 9.7% higher from the 28.820 million mt seen in the corresponding months of 2017.
By tonnage, the April-July 2019 increase against 2018 was 2.099 million mt while the corresponding rise in 2018 from 2017 was 2.787 million mt.
Another indicator of the weaker demand was that both imports and exports fell during the four months. The former was down 6% to 2.496 million mt on the year while the latter fell 23.5% to 1.474 million mt, a report from the Ministry of Steel showed.
The lower usage comes as demand from the automotive industry has slumped. The country’s vehicle production from April to July amounted to 9.72 million units, down 10.65% on the year, amid a cash crunch that has affected the availability of credit, and market concerns around slower economic growth.
The automotive industry contributes about 49% to India’s manufacturing GDP, Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers said in August.
ANNUAL GDP GROWTH FORECAST TRIMMED TO 6.9%
Early August, the Reserve Bank of India revised lower its GDP growth forecast for 2019-20 to 6.9% from 7% in June. Also, the RBI has cut interest rates four times in 2019 so far to support the economy. The last cut was on August 7, when the rate was reduced 35 basis points to 5.4%, the lowest since April 2010. As of August, the RBI has cut its repo rate by 110 basis points in 2019.
In addition to a slowdown in the automotive sector, the state bank said, “Construction activity indicators slackened, with contraction in cement production and slower growth in finished steel consumption in June.”
“Two key indicators of construction activity, viz., cement production and steel consumption, also contracted/slowed down,” Shaktikanta Das, governor of the RBI, said.
As a result, India is not expected to hit 7% GDP growth for fiscal 2019-20. In 2018-19, its GDP growth slowed to 6.8%, the lowest since 2014-2015. Over January-March 2019, GDP growth reached a five-year low of 5.8%. The April-June GDP result is expected end of August.
Other financial reports point to lower economic growth. For instance, in mid-August, the Australia and New Zealand Banking Group cut its forecast for India’s economic growth to 6.2% from 6.5% previously.
Although India’s steel production has turned it into the second largest global producer after China, its apparent finished steel consumption per capita has lagged far behind other leading countries.
For instance, India’s per capita steel use stood at 66.2 kg in 2017, while leading producer China was at 549.0 kg and South Korea was in the lead with 1,104.6 kg, data from the World Steel Association showed. China was the sixth-largest user while India was in 85th place.
“Based on early results of listed companies, demand conditions in the manufacturing sector remained weak in Q1 2019-20, with sales of manufacturing companies contracting by 2.4% [year on year], caused mainly by petroleum, automobile, and iron and steel companies,” Das said.
“Given the current and evolving inflation and growth scenario at this juncture, it can no longer be a business-as-usual approach. The economy needs a larger push,” he added.