Steel industry wants new government to push demand

Improved steel demands will bring down plant running costs, says Ashish Upadhyay

Update: 2014-05-13 15:18 GMT

New Delhi: Battered by subdued demand, steelfirms are looking forward to the new government to help revive  consumption that will in turn sort out various problems plaguing the sector.

The government will be in place following the results on Friday of the recently concluded general elections. "We don't need many things. Our sole demand from the new government is to help improve the demand for steel which was at its lowest in several years last fiscal. Improved demand will solve various problems that are impacting the industry," said an industry official.

Steel consumption in 2013-14 grew by just 0.6 per cent - lowest in four years - to 73.93 million tonnes, hit mainly by slow expansion of the domestic economy. In 2012-13 too it was very strong, growing just by a 3.3 per cent on account of the slackening economy and the high interest rate regime. Consumption had grown by 5.5 per cent in 2011-12 and 9.9 per cent in 2010-11.

Another industry representative said: "Subdued consumption is the root cause of many other problems that the steel sector is facing. Today, many of the steel firms are highly leveraged and a good demand will help them generate cash and improve liquidity."

End-user segments like automobiles and construction did not grow at the desired rates because of poor demand in a slow growing economy.

Ashish Upadhyay of India Ratings said demand for steel is unlikely to grow significantly before the last quarter of the current fiscal irrespective of the measures taken by the new government. "Any new policy decision to revive demand by the new government will take time to yield results," he said. An improved demand will push up capacity utilisation rates of the domestic steel industry from around 80-85 per cent now. Increased utilisation will bring down fixed cost of running a plant, he said, adding improved demand would result in better profitability. The consumption of steel depends on the growth of the economy. 

Similar News