In Short:
India’s steel exports are increasing due to softening domestic demand before elections. Experts predict India will become a net exporter soon. Government spending on infrastructure is low during elections. Analysts forecast a slowdown in demand growth after elections. Steel companies are focusing on exports. Domestic demand may improve post-election. However, experts believe this export growth is temporary due to exhausted import quotas and unfavorable export markets.
India’s Steel Exports Surge Ahead Amid Softening Domestic Demand
NEW DELHI: As the election season in India unfolds, the steel industry is experiencing a significant shift. The country’s steel exports are on an upward trajectory, with analysts predicting a return to being a net exporter of steel in the near future. This shift is primarily due to a deceleration in domestic demand, brought on by restrictions on government spending during the election period, which affects infrastructure and construction activities.
Current Scenario
In February alone, India’s steel exports saw a remarkable increase of over 21% compared to the previous month, reaching one million tonnes. Despite this surge, the country remained a net importer of steel for the first 11 months of the fiscal year 2024 (April-February).
In November of the same fiscal year, India transitioned from being a net exporter to a net importer as imports outpaced exports. However, this trend is expected to reverse post-election season.
Industry Insights
Experts from Icra Ltd anticipate a slowdown in domestic steel demand growth in FY25, projecting a decrease from the previous year’s growth rates. Observing trends from state assembly elections last year, there has been a clear slowdown in consumption growth, indicating a softer demand landscape for the industry.
Ritabrata Ghosh, Vice President at Icra, noted that early signals point to continued soft demand over the next two quarters, prompting domestic mills to increase exports as a strategy to counter subdued local demand.
Industry Perspective
Top steel industry executives acknowledge the temporary lull in domestic demand but remain optimistic about a post-election rebound. Ranjan Dhar, Chief Marketing Officer at ArcelorMittal Nippon Steel India, emphasized the importance of implementing import barriers to balance supply and demand.
However, analysts at BNP Paribas India caution that the current growth in steel exports may not be sustained for long. They attribute the recent rise to the exhaustion of European Union import quotas in January, highlighting challenges in the global export market.
Despite the uncertainties surrounding the steel industry, industry players remain hopeful for a resurgence in domestic demand once the election period concludes.
