Steel Demand Growth Lags Production In October 2021

Domestic steel production growth continued to lag production for the month ended October 2021, CARE Ratings has said in a report.

"While the overall production of crude steel and finished steel during October 2021 was higher, consumption of finished steel was lower than that registered in October 2020 as well as that registered in October 2019. Crude steel and finished steel production during October 2021 stood at 9.8 million tonnes (MT) and 9.0 MT respectively, indicating a growth of 8.6% and 8.5% respectively compared with October 2019. Year on year (y-o-y) production of crude steel grew by 2% however finished steel production fell by 1.3%," the ratings agency has noted.

According to the report, consumption of finished steel fell by a sharper 11.9% y-oy and by 6.2% when compared with October 2019. Low export volumes and high steel prices have impacted domestic steel demand.

"Semi-conductor shortage has also led to slow down in demand from the auto and white goods sector. During October 2021, vehicle sales declined by 5.3% y-o-y at 1.4 million as compared to 1.4 million vehicles sold in October 2020 and 1.9 million sales during October 2019, as per the Federation of Automobile Dealers Associations (FADA) data," the ratings agency has said.

"This was the worst festive season demand seen by the auto sector in a decade. The demand and supply of steel is expected to improve with rise in economic activity and will also be driven by the infrastructure push of the Government of India (GoI). As the economy comes out of the successive lock-downs imposed due to the pandemic, increased vaccination coverage and with the monsoon season now receding, GoI will resume the construction activities for the various infrastructure projects, leading to increased demand for steel products. The semiconductor shortage in the auto segment is likely to hurt the demand for flat steel products over the near term," it further noted.