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JSW Steel expects 6.5-7% steel demand growth for FY2020 in India

Steel News - Published on Mon, 27 May 2019

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The International Monetary Fund has revised CY 2019 global growth forecast to 3.3% (from 3.5% in Jan 2019). US economic growth remained robust during the quarter, though outlook has softened as fiscal impulse fades away. The Fed's decision to hold interest rates for 2019 bodes well for a sustained recovery. The Euro area growth outlook has softened on the back of weak industrial growth and soft private consumption with overhang from trade and political uncertainties. Japan's economy is stable with tailwinds from domestic spend and healthy private consumption, notwithstanding external trade weakness.

During the quarter economic activities picked up in China aided by policy support and outlook there is underpinned by calibrated fiscal and monetary policies. Overall, escalating trade measures and political uncertainty pose risks to the global growth outlook. Any positive development on the resolution of trade uncertainties should be seen as path to modest recovery and improved global growth outlook.

Global Steel spreads softened during the quarter driven by moderating demand outlook and a spike in raw material costs, mainly in seaborne iron ore on the back of supply disruptions Chinese steel production and exports have increased during the quarter. Strong Chinese output amidst moderating global demand is a source of risk.

India continues to remain a bright spot and has the distinction of witnessing the highest growth rate in steel consumption among major steel consuming markets. This, admittedly, has also made India a magnet to attract higher imports from steel surplus economies, especially from countries like Japan and South Korea who enjoy a Free Trade Agreement.

India's FY2019 crude steel production grew by 3.3% YoY, while the apparent finished steel consumption grew by 7.5%. Imports during this period surged by 4.7% YoY and exports declined by 33.9% YoY.

In India, a strong momentum in government spending on infrastructure is driving an increase in Gross Fixed Capital Formation (GFCF), this is likely to get an impetus with a stable government formation. While IIP and manufacturing PMI have weakened recently, and automotive and consumer durables production have corrected sharply, there is an expectation of improvement in H2 FY2020. A stable government is likely to take measures to spur investment and end user demand.

With stable government, previously announced outlays of INR ~1 trillion in the Interim Budget is expected to spur rural spending and aid overall consumer demand. Further expectations of a normal monsoon bode well for the rural demand.

As a result, the Company expects 6.5% - 7% steel demand growth for FY2020 in India.

Volatility in crude oil prices poses a risk to inflation, while tight liquidity and lack of credit availability remains a source of risk.

Source :

Posted By : Sanju Moirangthem on Mon, 27 May 2019
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