Demand for high value steel to grow

India is set to witness an uptrend in demand for high value added steel led by thrust on domestic production in defence, ship building, renewable energy and automobile sectors under the government’s Make in India programme. This is also expected to turn into a focus area of growth for domestic producers, S&P Global Platts has said in a report on opportunities in the commodities sector under Make in India programme. India is already self¬sufficient in commercial grade steel ¬¬ the grade used in infrastructure construction projects. Recent facility expansions raised India’s overall steel production capacity in 2015/16 to 118 million tonne (mt), up from about 110 mt the previous year. However, a key imbalance in the Indian steel sector is a lack of high value¬ added steel production capacity.  This imbalance is expected to widen as a result of the government’s “Make in India” campaign, and the expansion of India’s passenger vehicle market. The latter is expected to reach 9.4 million units per year by 2026, up from 3.41 million passenger vehicles during fiscal 2015/16. “The government is keen to see global auto makers set up manufacturing facilities within the country to supply both domestic and export markets. A similar desire to expand domestic production in the defense, ship-building and renewable energy industries will also drive demand for high value¬added steel, suggesting this will become a key focus of new investment for domestic steelmakers,” the report said. India is on the cusp of a transformation from a traditional ‘brick¬and¬mortar’ economy. Domestic consumption of steel per capita is around 65 kg, compared with a global average of 235 kg, indicating the scope for long¬term demand growth, the report added. Both the “Make in India” initiative and expected investment in infrastructure has created expectations of a substantial increase in domestic steel demand. CRISIL forecasts that Indian steel consumption will rise 5.3% year¬on¬year to 85.8 mt in fiscal 2016¬17, compared with subdued average annual growth of about 3.9% over the last five years. Short¬term steel demand is forecast to grow at 4.5¬5.5%, accelerating to between 6¬6.5% CAGR up to 2020¬21.