2015 likely to bring cheer to the Indian steel and iron ore industry
The “Make in India” concept envisioned by the new government guided by its supporting policies is expected to provide immense potential to the markets in the new year. The optimism owing to an expected resolution of issues around the mining industry and the addition of new steel making capacities has held the hopes very high for new year.
The healthy optimism is lead by the expected reopening of the mining industry in the coming months. Goa and Karnataka are likely to see some activity beginning by mid-2015, if not early. Green and brown field steel expansion plans are right on track and will give a boost to production growth by nearly 5-6%. Issues surrounding cheaper and inferior steel imports may resolve due to higher taxes and anti-dumping duties. Export duties and restrictions on iron ore may ease as the government has planned and introduction of GST would help in easier and faster movement of finished goods within the country.
Raw material situation is definitely going to give advantage to the steel makers. Even if the steel majors would like to import or buy domestically, the markets will offer good opportunities 2015. Global iron ore and coal prices will remain low due to surplus availability while domestically, the situation will open up after the restrictions are pulled down by the state governments and apex court. Orissa and Jharkhand are likely to come back full force around mid-2015 and with the state government signing up MoUs with steel producers for supply of raw materials, the situation is soon going to give support to the steel parties.
Coming to production and demand of Indian steel, the country is on track with production but the demand growth is still dependent on the policies being implemented. While production has grown at a pace faster than the global average for a significant part of 2014, demand has been very slow and unsteady with the sector looking for a boost from the new government’s stated emphasis on manufacturing and infrastructure sectors.
The “Make in India” campaign is the best hope for the steel producers who are also looking to expand their capacities and provide nearly 125 million tons of crude steel strength to the country in the next fiscal. The campaign is likely to boost the country’s steel consumption potential as well in the coming years. India’s per capita consumption is around one-fourth of the international average sitting close to 60 kgs and this keeps the hopes renewed for further enhancement and betterment for the country. The potential is quite strong by the government’s policies would build the path towards harnessing it.
The government is planning a wide array of infrastructure projects which includes major and minor ports, highways, freight corridors and even construction and rural projects to boost the consumption of steel and create a robust demand going ahead.
Meanwhile, the industry’s major hurdle is its steel import reliance which has been giving problems to the domestic producers and consumers. Stepping into 2015, India’s reliance on steel imports is likely to remain steady which is another good sign as the same had come down between 2012-13 versus 2013-14. The major issues the government wants to resolve to ease the import situation is the unwillingness of steel plants to put up certain facilities when domestic demand for a grade is low even though the companies are technically capable of producing the same and lower prices in the international markets encouraging imports as compared to self production.
Automobile companies are looking at better sales in 2015 after the launch of many varied models in 2014. Tax reliefs have already been proposed for hybrid and fuel efficient vehicles. All this points to the fact that the emphasis in 2015 would be on increasing the sales rather than launching new vehicles. The real-estate is watching the markets closely as major land reforms are likely to come up enabling a more wider opening in this sector.
Hence, after the worst possible fears coming true and spoiling the spirits in 2014, the entire industry is now pinning its hopes on 2015. The worst is over and so is 2014. The expectations are very high from the coming year and so could be the results as well.