Editorial – October 2024
The steel industry in India is dwelling on a strong foundation and is poised for a decent growth for at least a few years. As mentioned many times in this column, the economic growth of the country is dependent and driven by infrastructure development, and ‘steel’ is at the center of the infra development process. Thus, if the country has to grow on the economic front, it must emphasize infra projects, which will ensure an upward pull for steel demand. Though this is true for a long-term view, in the short term, the steel industry seems to be struggling. We also see a relatively low performance by the auto sector, which will negatively impact steel demand. Generally, in the past few years, it has been observed that steel demand gradually picks up after Diwali and remains high until the fiscal year ends, i.e., till the end of March. The reasons are simple. During the monsoon, construction activity slows down considerably, and thus, steel offtake decreases. This phenomenon reverses after the monsoon is over. Also, year-end target pressures gradually increase in every company, giving an upward push to the demand. However, this year, steel demand seems to be following a different pattern. Why is this so?
Firstly, let us accept the fact that international geopolitics has a definite effect on businesses, industrial activity, international trade, etc., and this is true for the iron and steel industry as well. Today, the international situation is very delicate. The Ukraine–Russia war, as well as Israel’s conflict with many groups and countries, has made the situation in the Middle East quite unstable. This has caused the economies of many countries to tremble and also affected international trade in the iron and steel sector. Another factor is India’s neighboring countries. Most of these countries, including Bangladesh, Pakistan, and Sri Lanka, are struggling on the economic front. India used to have a sizeable trade with these countries, which has now reduced considerably. In my opinion, these are some of the factors responsible for the current low performance of the iron and steel sector. Another factor is the ‘green’ revolution in the iron and steel industry. This is also expected to reduce international trade, especially in the EU region. We have earlier discussed this in detail in this column. Though India has registered its protest against the implementation of CBAM, most Indian steel mills are, at least today, not in a position to monitor and substantially reduce the carbon footprint before 2026.
Anyway, the long-term future of the industry does remain bright, and I am sure this temporary phase will end soon. Maybe a regime change in the US will trigger the change!