Page 39 - Steel Tech India eMagazine Volume April 2022

VOL. 16 • NO. 3 • April 2022

Market

Steel Market Scenario

ECONOMY FY2022 with a double-digit growth of around 11%, a
feat last achieved way back in FY2011. Supported by
the war in Ukraine has triggered not only a costly the Government’s large infrastructure spending plans,
humanitarian crisis but also economic damage resulting domestic steel demand is pegged to grow at a healthy
in a significant slowdown in global growth in 2022 and 7-8% in FY2023. Further, the sanctions on Russia could
add to inflation. Fuel and food prices have increased open new export opportunities for Indian steel mills in
rapidly, hitting vulnerable populations in low-income geographies like europe, the Middle east and the US.
countries hardest. Global growth is expected to slow however, steelmakers will face input cost pressures in
significantly in 2022, from an estimated 6.1% in 2021 the near term as Russia remains a key global supplier
to 3.6% in 2022 and 2023. A severe double-digit drop of many steelmaking raw materials.”
in GDP is expected in Ukraine due to fighting. A deep
contraction is projected for Russia due to sanctions and Given two back-to-back years of strong performance,
european countries’ decisions to scale back energy the steel industry’s consolidated borrowings are today
imports. the economic costs of war are expected to at their lowest levels since March 2011; the industry’s
spread farther afield through commodity markets, credit metrics, therefore, witnessed a significant
trade, andto a lesser extentfinancial interlinkages. In improvement, with total debt/ OPBItDA reducing from
nearby Asia, Srilanka, Pakistan and Nepal are already 4.4 times in FY2020 to around 1 time in FY2022 (F).
facing economic crisis. In India, increased prices of fuel ICRA notes that notwithstanding the sizeable expansion
has led to sharp inflation plans, given the deleveraging that has happened over
the last six quarters, and the healthy cash flows likely to
Indian Steel Scenario
be enjoyed, the steel industry today is more resilient to
Domestic steel industry earnings over the last year withstand project-relatedrisks, which had significantly
remained healthy which enabled most of the steel plants weakened the sectors’ credit profile during the previous
to make record profits and they announced expansion capex cycle of FY2012-FY2016. With the capital
for new projects besides acquisition of some companies deployment for upcoming projects remaining relatively
like JSW Steel taking over BPSl and tata Steel got moderate during the initial years of implementation, the
NINL.This was despite input cost pressuresdue to high industry’s key leverage ratio of total debt/ OPBItDA is
coal prices and energy costs. expected to remain at a comfortable 1 time in FY2023
as well.
Reduced domestic demand and comparative lower
prices of steel encouraged the steel producers for more however, the recent imposition of 15% exports duty on
exports which was a record in last year. the ratings almost all finished steel products and pig iron is likely to
agency, IcRA maintained the steel industry’s outlook to dampen the profit margin of steel plants and domestic
be Positive for FY 2023. steel prices are likely to fall. Removal of import duties of
coal, coke and ferronickel and export duty increase for
IcRAsaid: “Domestic steel demand registered a
healthy sequential pick-up from December 2021 as iron ore and pellets will reduce to some extent the cost
construction activity gathered momentum, which, of steel production in the country and improve avail
coupled with the low base of FY2021, helped close ability of iron ore and pellets in the country.

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