India's Steel Consumption Surges

Steel consumption in India during April and May 2009, the first two months of the 2009-10 fiscal year, stood at 8.2 million tons, registering an increase of 6 percent year over year, compared to the consumption of 7.76 million tons during April and May of 2008. For the same period, domestic steel production rose 2 percent year over year from 9.02 million tons in April-May 2008 to 9.24 million tons in April-May 2009.

Industrial Info Resources (Sugar Land, TX) reports that the growth in domestic steel consumption has been attributed to a rise in demand from the automobile and construction sectors. Sales of locally manufactured cars have been rising for the past four months, with figures for May showing a growth of 2.4 percent year over year. The construction sector is expected to account for 6 percent of the growth in the sale of steel this fiscal year, compared to 1.3 percent last year.

In May 2009, Steel Authority of India Limited (SAIL) (New Delhi) recorded the best-ever monthly sales in the Indian market at 1 million tons, an increase of 12 percent from sales in May 2008. This included 1.1 million tons of saleable steel and 400,000 tons of special steels and high-value-added products, representing growths of 5 percent and 12 percent, respectively, on a year-over-year basis. In April-May 2009, SAIL's domestic sales of steel stood at 1.9 million tons, representing an increase of 21 percent year over year.

During the two months under review, steel imports soared by 6 percent year over year, from 997,000 tons to 1.057 million tons. However, exports fell 40 percent from 700,000 tons to 400,000 tons. Hot-rolled coils accounted for 28 percent of the total imports, equivalent to 350,000 tons in April and May 2009, compared to 274,000 tons for the same period last year.

Steel Secretary P. K. Rastogi said that the surge in steel consumption and the rise in imports are indicators of the burgeoning demand for steel in the Indian market. He said that this trend augured well for the domestic steel sector and estimated that steel production and consumption in the country would grow 5-10 percent in the current fiscal year. The World Steel Association also estimated demand for steel in the country to grow by about 2 percent in 2009-10, whereas other countries are expected to witness a negative growth of 15 percent in demand for steel this fiscal year.

The revival of the automobile and construction sectors and the consequent rise in the demand for steel is being attributed in part to the re-election of the Congress-led United Party Alliance, contributing to political stability in India. Prime Minister Dr. Manmohan Singh recently said that the country would achieve an economic growth of at least 7 percent this fiscal year. He explained that India's savings rate, at 35 percent of the gross domestic product, allows for an increase in the allocation of funds, particularly for the development of infrastructure in the country.

While addressing the two houses of the Indian parliament earlier this month, India's president Pratibha Patil said that the government would work towards reviving economic growth. Patil insisted that fiscal prudence be maintained, even as investments in sectors such as infrastructure are increased. President Patil also mentioned that the immediate priority of the government must be to focus on management of the nation's economy in a bid to counter the effects of the global economic slowdown.