Low base, safeguard duty to prop steel output this financial year

Domestic steel production is slated to grow 10.5-11.5 per cent this fiscal, driven by a low base and the government's protective trade measures, even as demand growth moderates to 7-8 per cent, after recording a double-digit rise over the past four years, and global markets remain flat.

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‘Though key user segments, such as construction and infrastructure, are expected to cool off, we maintain a stable outlook for the sector, supported by better operating margin for flat-steel players, range-bound raw material prices and healthy financial metrics across the board.

Implementation of the safeguard duty on non-alloy flat-steel products shrank imports 30-32 per cent this fiscal, resulting in a derived domestic demand. This significantly boosted production with domestic players stepping in to meet this demand.

Exports are also expected to grow 28-30 percent this fiscal due to better realisation opportunities in key markets, particularly the European Union. Traders are rushing to utilise regional import quotas as free allocation under the Carbon Border Adjustment Mechanism may be reduced from January.

Domestic steel demand rose 78 percent in the first eight months of this fiscal and is seen steady for rest of the year, led by moderation in key steel-consuming segments such as urban housing, infrastructure, engineering goods and fabrication.

Growth in the building and construction segment has slowed this fiscal, with fewer project launches over the past few years.