Posted on 22 Dec 2021
Indian domestic demand will remain elevated in the fiscal year ending 31 March 2023 (FY23), but exports are likely to decline as a result, says Fitch Ratings.
“We expect the key drivers of demand for flat steel next year should be sectors such as white goods, automotive and packaging, backed by increased consumer confidence and a gradual easing of electronic chip shortages,” says Fitch. “Demand for long steel products, mainly used in construction, should be boosted by a recovery in the real estate sector. Also, the demand should be boosted by a sustained government focus on infrastructure development, backed by broader economic growth and improved tax collections.”
“Our estimates imply that [Indian domestic] demand will grow by more than 20 million tonnes from FY21 to reach around 115mt in FY23. Steel demand had grown each quarter since 2QFY21, before declining in 1QFY22 due to the second wave of Covid-19 infections,” the agency adds.
Indian steel exports, however, will remain low in the second half of FY22 due to the robust domestic demand, consumption growth and limited capacity expansions. “Consumption was also slightly lower on-year and on-quarter in the second quarter of FY22, due to seasonal effects and support from pent-up demand in FY21. However, we expect growth to resume from the third quarter of FY22,” Fitch observes.
According to the rating agency, Indian steelmakers have resumed capital expenditure on capacity expansion projects. Major steel companies each plan to add 5 million tonnes/year or more capacity in the next three years to benefit from the country’s potential for greater demand in the long term, Kallanish notes.
“A major share of capacity expansion should be commissioned by FY24, and we expect spending on these projects to gain momentum and result in materially higher capex in FY23,” Fitch concludes.
Source:Kallanish
