Robust steel demand to keep end-product prices high

Moody's Investors Service Monday said robust steel demand, especially from the domestic construction, infrastructure, and automotive sectors will keep end-product prices high, even as rising costs for key inputs, coking coal, and iron ore pressure profitability.

In its latest report, Moody's said the outlook for the Asian steel industry is stable, reflecting the consideration that the profitability of rated producers will increase moderately over the next 12 months against the backdrop of overall steady regional demand, it said.

For India, the US-based agency said that "with minimal new steel capacity expected to be commissioned until 2021 in India, robust steel demand, especially from the construction, infrastructure and automotive sectors, will keep end-product prices high, even as rising costs for key inputs, coking coal and iron ore, pressure profitability."

Meanwhile, India's steel sector consolidation will drive improvement in the industry's capacity utilization levels and mute the pressure on profitability, Moody's said.

India has set a target of increasing its steel-making capacity to 300 million tonnes by 2030-31.

It further said India will be the brightest spot over the next 12-18 months, with the country's steel consumption rising at least 5.5-6 percent every year, tracking strong GDP growth of 7.3-7.5 percent.

Under the new steel policy, the country aims to increase per capita steel consumption to the level of 160 kg by 2030.