What to expect from Indian steel market in CY'24?

• CY'23 a year of mixed fortunes for steel industry
  
  
• Pre-election infra spend contributed to demand
  
  
• Elections, govt formation to impact industry in CY'24
  
  

Morning Brief: The Indian steel market, in 2023, was marked by strong domestic demand while exports remained subdued. Imports were a major worry, forcing steel-makers to urge the government to intervene -- which it did in the form of more stringent quality control measures under BIS. Overall, it was a year of mixed fortunes. But, what lies ahead? SteelMint explores:

Snapshot 2023

Crude steel production: Crude steel production rose 9% y-o-y to 136 million tonnes (mnt) in 2023 (CY'23) against 124.6 mnt in CY'22.

Decent domestic demand kept production high. There were periods of oversupply, and inventory pile-ups. Tier-1 mills mostly operated at full capacity but resorted to maintenance over July-September. Smaller units calibrated production to balance out excess supply.

Steel production: Steel production rose 9% to 130 mnt in 2023 against 119 mnt last year. Domestic demand ensured good output.

Steel exports: Steel exports dropped 25% to 8.2 mnt in 2023. China adopted an aggressive exports stance, conquering traditional markets of Indian mills with cheaper offers. Secondly, global factors like high energy prices, inflation and currency slides dented global demand.

Steel imports: Steel imports were up 25% y-o-y to 7.5 mnt in 2023. Indian end-users were encouraged to import, thanks to the cost viability. India became a net importer for three consecutive months from September.

Consumption: Steel consumption was up 13% y-o-y to 129 mnt in 2023. Sustained infrastructure push kept demand buoyant.

Factors that drove demand in CY'23

Pre-election infra spends: With an eye on several state elections this year, the government, in Budget 2023-24, increased investment outlay for infrastructure by 33% to INR 10 lakh crore, encouraging demand.

Automotive, PEB sales rise: Car sales may grow almost 10% in 2023 amid higher consumer spending. November saw the highest monthly sales ever at 28.54 lakh units. PEB, engineering goods and other flat steel consuming sectors did well too.

What to expect in CY'24

CY'24 at a glance

Crude steel capacity is expected to rise 10% to 184 mnt (from 167 mnt in CY'23).

Crude steel production will be up 7% to around 145 mnt (136 mnt in CY'23).

Steel production may rise 8%, to 140 mnt (130 mnt).

Steel consumption is seen rising 7.5% to 138 mnt (129 mnt).

Steel imports may increase 14% to 8 mnt (7 mnt); and Exports are seen up 11% to 10 mnt (9 mnt).

Elections, new govt formation: Next year will be marked by the general elections and formation of a new government. Projects may get into cold storage till a new government is formed. There can be funding delays by a quarter post-formation of new government.

Upcoming capacities in CY'24: Another 17 mnt of capacity will be added in CY'24 which will take up the total to 184 mnt. NMDC's 3-mnt plant will be fully operational while JSW will add 5 mnt (Vijayanagar) and Tata Steel Group, 5 mnt in Kalinganagar and 1 mnt at Bhushan Steel. The balance 3 mnt will come from EAF-IF mills.

Global factors: If China continues to export aggressively and India's domestic demand does not increase at 2023's pace of 13-15%, there can be excess supply amid newer capacity additions. Then Indian steel prices will come under pressure and mills may need to export aggressively. If China sustains cheap offers, imports may again increase.

2nd India Steel and Metal Conference: Keeping above dynamics in mind, SteelMint, along with the Steel Users Federation of India, will be organizing the 2nd India Steel and Metal Conference: Supply Chain & Sourcing Strategies, over 10-11 January, 2024 in Mumbai. Several key sessions will explore the current challenges and enablers. Experts will also try to read future trends.

Particularly, a session on "Factors that will drive Indian steel prices in short to medium term", will discuss the changing demand-supply balance; raw material supply and pricing scenario; changing trade flows and their impact on steel prices, amongst other issues.

This is the only conference focusing on steel end-user industries and their issues. It will be followed by the glittering SUFI Steel Awards, 2023. Register fast.