India To Turn Net Steel Exporter In Two Years: Care Ratings

Over the past decade, domestic steel industry has grown at CAGR of 7 percent against global average of 3 percent with China growing by 6 percent.

- Steel Insights Bureau

In line with domestic steel consumption, capacity has shown remarkable addition.

Despite net capacity addition, utilization of domestic industry has hovered around 8285 percent which is considerably higher than the global average of 72-75 percent in the last few years.

However, India has turned into a net importer of steel during FY19 while import growth has remained constant while exports declined by more than 30 percent.

Outlook

Indian steel industry is much more favourably placed than other countries.

Despite the hindrances, we expect that Indian steel demand to grow by a modest pace of 5.5 percent in the next two years.

We expect steel capacity addition of 12 mt in the next 2-3 years consisting of largely the brownfield capex of large steel players while no capacity addition is envisaged by the secondary players.

We also expect incremental demand of 18-20 mt.

So, despite increasing utilization levels, the country is likely to actually move into a net importer phase.

Capacity utilization of the domestic steel sector is likely to be around 80-90 percent in the next two-three years.

In the last decade, despite falling margins and demand growth, global steel has continued to add on to capacity.

These capacities are coming up in India, China and other Asian economies.

While there are also shutdown in capacities, the net addition in capacity continued till CY15.

“We believe the current over capacity situation in global steel industry has reached 450 million tons which would be around 20 percent of the existing capacity if we are considering 100 percent operating rate,” an official of the rating agency said.

However, if we are assuming operating rate of 80%, overcapacity situation falls down to around 100 million tons or 5 percent of existing capacity.”