Demonetisation to impact steel & consuming sectors

The government’s demonetisation move will impact the steel industry and its consuming sectors hard, according to analysts.

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Domestic steel demand has remained stagnant in the June quarter, with consumption growing by just 0.4 percent.

However, demand improved since July, pushing Q2 consumption by 6.8 percent.

However, going forward, an anticipated slowdown in the real estate sector on account of the government’s demonetisation drive will impact demand of long steel players in the immediate term.

Given that a majority of the small to medium-sized secondary steel players in India are positioned in the long products segment, the impact of this slowdown in real estate demand is expected to affect their capacity utilisation levels, sources added.

In flat products, used by the automobile and white goods sectors, the impact of the slowdown would be limited though rural demand for some of the flat products like corrugated sheets, galvanised sheets etc is likely to reduce in the near term, transactions being largely cash-based.