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Indian steel industry looking at brighter prospects in 2018 - Mr Sushim Banerjee-The 19th China (Guangzhou) Int¡¯l Spring Industry Exhibition
2/1/2018 Spring Industry Exhibition-Spring expo |
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Already a few assessments are available on how the new year would shape for the steel industry. Irrespective of the details on price movement and profitability, it is generally believed that the year 2018 would give more benefits to the steel industry in terms of demand, costs of production, market realisation and exports than what was experienced in the previous year. The global prices of iron ore, which is currently traded at USD 76.85 per tonne cfr China is slated to rule within USD 50 per tonne and USD 55 per tonne in 2018, while the ruling price of Australian semi premium coking coal at USD 230 per tonne would hover between USD 155 per tonne to USD 160 per tonne fob Australia in 2018. The scrap prices which is currently pegged at USD 363 per tonne for 80:20 HMS grade ex-USA would be settled at USD 330 per tonne in 2018. These projections on major raw materials in the coming months would imply that there is likely to be a minor downward trend in costs of steel production. As China would continue to drive global steel industry in the coming months vigorously, it is essential to have a clear outline on how the Chinese economy would behave in the next year, the role that the Government sponsored Stimulus measures would play in not allowing GFCF to come down from the present 42% of GDP.
The latest IMF projection has estimated the global economy to grow at 3.9% in 2018, a 0.2% more than was projected in October 17. Chinese economy has been slated to grow at 6.6% and India¡¯s GDP is to move up by 7.4% in 2018 as compared to 6.7% in the previous year. It is gratifying to note that while Europe and USA have been projected to grow by 2.2% and 2.4%, respectively in 2018. The positive growth scenario in these two major markets in the current year would provide comfort for Indian exports in these traditional destinations and would also undermine the risks of flight of capital from India on the expected rise in interest in USA, a possibility not entirely ruled out, but the intensity of the risks is mitigated due to the better scenario projected for US economy. Russian economy is to grow by1.7% in 2018. The world trade flows in 2018 is projected to grow by a healthy 4.6%. The brighter economic prospects for the global economy have been duly authenticated by market optimism reflected in higher PMI for December 17 in most of the major economies like Japan, USA, Germany, China, South Korea and India.
It appears that the scourge of excess capacity syndrome in global steel industry would pose a lesser adverse impact in 2018. China has been successful in closing down the IF capacity to the extent of 35 to 40 million tonne and simultaneously eliminating additional steelmaking capacity of 30 to 35 million tonne over the last two years as a part of closing down nearly 150 million tonne of steel capacity by 2020. It has helped Chinese domestic prices to climb upwards and strengthening the export offers also. The current Chinese export offers of HRC (SS 400 ex-Tianjin) at USD 575 per tonne yields an EBITDA margin exceeding USD 90 per tonne to Chinese exporters. The move has helped the Russian offers of HRC to move round USD 575 per tonne. The spate of AD, Safeguard, Countervailing duties primarily by USA, EU has forced the exporters of cheap steel products to raise their prices. The current export offers of CRC by China (fob Shanghai) at USD 616 per tonne, Plates (commercial,fob Shanghai) at USD 563 per tonne and Coated products (FOB Shanghai) at USD 678 per tonne are remunerative for all the exporters.
This backdrop of a favourable market scenario of global steel industry is likely to give India a good platform to maximise exports and a much lesser threat of cheap imports in 2018. It is possible to enhance the export share of finished steel production from the current 9.6% to a minimum 12%. The individual exporters must earmark a higher tonnage for steel exports in the current year by diversifying the export destinations to Africa, West Asia and South East Asian countries. The current applicable AD on imports of HR, plates, CR, wire rods and coated products would eliminate the threat of cheap imports. The recently formed Global Steel Forum has acknowledged India¡¯s capacity expansion of steel as a function of growing consumption in the domestic market. The higher consumption crucially dependent on infrastructure investment from public and private sources in port-led and rail and road-led development, more spending by the household and the government in real estate, affordable housing, smart cities, would enable the demand to grow by a minimum 7-8% from the current level of 5.2%. A brighter market demand would make India¡¯s crude steel production to grow by a minimum 8% to reach 108 MT by 2018 to enable it to occupy the second position in global steel production. The NCLT resolution during the year would also enable Indian steel industry to achieve a higher capacity utilisation in crude steel production by the second half of 2018.
-The 19th China (Guangzhou) Int¡¯l Spring
Industry Exhibition
-Spring Industry Exhibition, spring expo,
2018 Spring exhibition, 2018 Spring expo, China Spring exhibition, China Spring
expo, steel spring exhibition, steel spring expo
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