Steel demand in India to outpace regional average: Moody's

New Delhi: Steel demand in India will outpace the regional average while profitability of domestic steel companies will outperform regional peers on account of increase in domestic demand, Moody's on August 17 said.

"In particular, steel demand in India will outpace the regional average as the country’s GDP growth of around 7.5 per cent in 2016 and 2017 based on Moody's forecast, remains among the highest in Asia," Moody’s Investors Services said in a report. India’s reform and policy support for infrastructure and manufacturing, as well as increasing urbanisation, will drive steel consumption, said the report "Steel Asia: Lower Earnings Keep Outlook Negative".

The profitability of Indian steel companies such as Tata Steel and JSW Steel will outperform that of regional peers owing to rising domestic demand and Indian government's protectionist measures in the form of minimum import prices and anti-dumping duties, it said.

In addition, the expected ramp-up of Tata Steel’s greenfield Kalinganagar operations and JSWs brownfield expansion will help raise the companies earnings in 2016.

"We expect the profitability of the rated steel producers to remain higher than the regional industry average, because most of them are leaders in their respective countries, sell high-margin premium steel products and benefit from business integration and diversification, it said. "We expect Asian steel demand will continue to decline by a low-single-digit percentage in the next 12 months owing mainly to slowing demand from China’s manufacturing and property sectors," it added.

Indian and Southeast Asian demand will rise but would not offset the decline in China, which accounts for about 70 per cent of Asian steel consumption, Moody's report said.

"We expect the volume of steel exported from China will grow by a low-single-digit percentage in the next 12 months and flatten out towards the end of 2017, down from 20 per cent year-on-year growth in 2015," it said.

Countries are taking steps to limit the import of cheap steel, primarily from China, in an effort to protect their own steelmakers. The growth in Chinese steel exports slowed to 9 per cent per cent during the first half of 2016, according to China's General Administration of Customs.