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India may have become a net exporter of steel this year, but domestic demand may remain a problem area.
The US-based Moody’s Investors Service has said in a recent report, titled “Asia: Steel – 2020 outlook,” that India’s steel growth will slow down in the coming days because of weak automotive and manufacturing demand.
In October this year, India’s domestic steel production fell for the first time in seven months. Steelmakers produced about 9.09 million tons of steel, down by 3.4% over October last year, according to figures by the World Steel Association.
The last time steel production had fallen in a month was in March 2019, when the decline was 1%, Business Today reported.
October’s decline came after a steep drop in the growth rate in September, when production grew by just 1.6% (a five-month low).
The Indian government, on the other hand, paints a different picture.
The steel sector is witnessing growth in the recent past after a slowdown, with India becoming a net exporter in the current financial year, according to minister Dharmendra Pradhan.
The minister said in the Indian Parliament that steel imports had gone up slightly in the last three years, rising from 7.23 million tons in 2016-17 to 7.83 million tons in 2018-19.
But domestic production had consistently increased, regardless of such imports.
Contrary to reports talking of a slowdown in domestic uptake of steel, the minister said the steel sector was “witnessing improvement in recent past after a slow down.”
However, a report in The Economic Times, citing a report by India Ratings and Research (Ind-Ra), noted India’s steel’s net leverage and interest coverage are likely to deteriorate in fiscal year 2020 as a result of compressed EBITDA margins, due to a drop in realizations. Much of this was because of a demand slowdown and increase in raw material prices in fiscal year 2020 on a year-over-year basis.
