Expert Opinion: India's apparent steel consumption to increase y-o-y in CY'22

• Steel intensity in infrastructure construction holds the key
  
  
• Inland waterway connectivity boosting AM/NS India's growth plans
  
  
• Rise in automobile production in Q1CY'22 to drive steel demand
  
  

Leading Indian steel consumers such as construction and automotive majors expanding their global footprint will contribute to boosting domestic steel demand in the medium to long term, observed Ranjan Dhar, Sr. Vice-President and CMO, AM/NS India, at a webinar conducted recently as part of SteelMint's ENGAGE 2.0 series.

Disruption in steel supply globally due to geopolitical fissures and supply chain constraints is fuelling exports and long-term prospects remain supported on production restrictions in China, he stated.

Despite the envisaged growth in infrastructure propelling steel demand, steel intensity in infrastructure construction needs to be enhanced in order to not only drive steel usage but also fast-track construction projects.

Almost all demand indicators such as the purchase managers index (PMI), GST collection, GDP growth and monthly auto production project a positive growth picture, Dhar pointed out.

Policy enablers:
India is expected to produce close to 125 million tonnes (mnt) of crude steel in CY'22 compared to 118.2 mnt in CY'21. Apparent steel consumption will be around 111-112 mnt or even more compared with 106 mnt in CY'21, with an expected 7-8% growth in GDP.

Government initiatives such as Make in India, Atmanirbhar Bharat, urban and rural housing, smart city projects and the Production Linked Incentive (PLI) scheme are boosting steel demand.

In the last Budget, a significant increase of 35.4% in capital expenditure to INR 7.5 lakh crore has been mooted and the effective expenditure is estimated at 10.68 lakh crore, which is 4% of the country's GDP.

The government has allocated INR 11,000 crore for the National Infrastructure Pipeline (NIP). However, "first we need to see whether these projects are done in a steel intensive way," Dhar said. Any country seeking to fast-track infrastructure development will need to do it in a steel-intensive way.

Dwelling on the PM Gatishakti programme and the opportunities that AM/NS can tap into, the expert said that the steel major is already using a lot of coastal movement, thanks to the Sagarmala project.

The company, based on the west coast of India, is getting iron ore from the east coast via the sea route to the west coast and taking back steel from the west coast to the southern and eastern parts of the country, not to forget dispatches for exports.

As the company's capacity expansion happens in Hazira and also in the east coast, the inland waterway connectivity will be further utilised.

Sector-wise outlook:

Infrastructure: The National Highway Network is expanding to 25,000 km, as announced in the Budget this year for which INR 20,000 crore has allotted. Gatishakti is a mega umbrella initiative under which everything will be fast-tracked.

Construction & housing: INR 48,000 crore has been allotted under the PM Awas Yojana and 80,000 houses will be covered under this scheme. AM/NS is been expanding its steel Hypermart wherein it is taking steel directly by the company managed outlets to the small and medium cities across the country.

Renewables: India has got abundant natural resources. Initiatives by the government and mega investments by the private sector are expanding the renewable space, thereby bolstering steel demand. AM/NS is expanding steel production and bringing in newer products in the renewable energy space, be it wind, hydro or solar.

Electric vehicles: In the midst of the war in Europe, fuel prices are edging higher and so it is highly likely that the move towards EVs will gather momentum. In addition, there is pent up demand in the automotive sector due to the chip shortage last year. All auto producers are sitting on a huge backlog of orders. Even if there is some disruption due to current oil prices, producers will use that time to clear their order backlog.

The chip issue is also getting settled and about 95% of supply has been restored, which has led to an increase in monthly auto production. For instance, Maruti Suzuki will be producing 30,000-40,000 more cars per month in Jan-Mar'22 quarter compared to the preceding quarter.

AM/NS India wants to settle for long-term contracts with automakers. "Our relationship with the auto industry is symbiotic. We understand each other's needs. Now the steel industry is in a huge supply disruption globally so we will be talking with the automakers before settling the contracts. We would not like to change the period of contracts," Dhar stated.