India's rebar production up by 16%, consumption up by 20% in FY23. What lies ahead?

• Domestic demand supported production, prices last fiscal
  
  
• Exports plunged 80% amid duty levy, slack global demand
  
  
• Will elections be a boon or bane?
  
  

Morning Brief: India's rebar production increased 16% to almost 39 million tonnes (mnt) in financial year 2022-23 (FY23) from 33 mnt in FY22.

The share of the blast furnace (BF) route in the total showed a rise of 14% y-o-y to nearly 12 mnt compared to 10 mnt in FY22 while the induction furnace (IF) route increased 17% to 27 mnt against 23 mnt in this period.

Among the tier-1 mills, in FY23, the JSW Steel was the largest producer with 2.97 mnt, followed by Steel Authority of India (SAIL) with 2.72 mnt. Tata Steel and Jindal Steel & Power followed with 2.65 mnt and 1.92 mnt each respectively while Rashtriya Ispat Nigam Limited (RINL) brought up the rear with 1.50 mnt.

Consumption

India's apparent rebar consumption rose 20% to 39 mnt in FY23 against 32 mnt in the previous fiscal. This was supported by increase in property registration in the country's largest real estate market, Mumbai. Property registrations rose 7% y-o-y to 116,078 units in FY23 as against 108,861 units seen in FY22.

Though exports plunged last fiscal, good demand in the domestic market supported consumption and production.

India's BF-route rebar prices rose an average 8% to INR 60,500/t ($738/t), exy-Mumbai, in FY23 as compared to INR 56,000/t ($683/t) in FY22. Meanwhile, in the IF segment, prices spiked to INR 56,200/t ($685/t) in FY23 as against INR 51,300 ($626/t), exw-Mumbai, in FY22, recording an increase of about 10% on a yearly basis.

However, the price spread between primary and secondary mills narrowed slightly by INR 400/t ($5/t) to INR 4,300/t ($52/t) in FY23.

Exports

Overseas sales of rebars plunged almost 80% to 0.22 mnt last fiscal compared to 1.11 mnt in the preceding fiscal. One reason was the 15% export tax that had been slapped in May 2023 but which was recalled in November last.

Data tracked from FY19 reveals that rebar exports had been steadily growing to touch the highest of 1.11mnt in FY22. But the plunge to 0.22 mnt was the lowest in the last five years since FY19.

But, overall, volumes also dropped because of a slowdown in consumption in major importing countries. For instance, exports to the UAE declined a sharp 30% to around 14,000 tonnes (20,000 t in FY22). Volumes to Bangladesh dropped 48% to less than 8,000 t (15,000 t) while the United Kingdom saw a 73% plunge to a mere 7,188 t (more than 26,000 t). Last fiscal was characterised by sliding currency values and limits on new LCs for Asian economies, and high energy prices in the West, which affected demand.

Current scenario

BF-route rebar trade prices are currently at a 4-month low and have been on a freefall since the last 12 consecutive weeks. M-o-m prices have seen a INR 1,500/t drop in April whereas hot rolled coils have fallen by a more nominal INR 400/t.

Falling raw material prices have not been supportive either.

Outlook

Demand from the projects segment is very slow at present as developers have moved to the sidelines, waiting for further price falls, if any. Hence, these players are only resorting to need-based purchases. However, demand is expected to pick up ahead of the monsoons.

Also, with the general elections slated to take place in 2024, there will be a pressure on completing infra projects ahead of fiscal year-end and which may work to the advantage of steelmakers.

On the other hand, in the short to medium term, with many state Assembly polls lined up this year, trade activities may be impacted and have a bearing on finished steel demand, and hence production.