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Automotive, infrastructure sectors set to drive steel demand

Ramnath Subbu

Steel prices are expected to remain firm in first half of New Year

MUMBAI: The Indian steel industry, after having witnessed a roller coaster ride in prices during 2005, largely due to skyrocketing input prices earlier in the year, has settled down to more realistic levels.

Hot rolled steel prices had moved up to hover around $650 a tonne in early 2005 and have settled at around $500 a tonne. This was largely precipitated by China continuing to aggressively buying up the raw materials — coking coal, iron ore and scrap in the global market.

China now seems to have a capacity overhang of steel.

According to B. Muthuraman, Managing Director, Tata Steel, "I expect the robust growth in Indian economy to continue which will maintain the buoyancy in steel demand, though steel prices can soften, as it should, as we go forward."

In the National Steel Policy announced in November, the government has targeted a capacity of 110 million tonnes by 2020 from the current level of 38 million tonnes.

The Steel Minister, Ram Vilas Paswan, said investments to the tune of Rs. 2,70,000 crore were lined up in the sector through memoranda of understanding signed by different state governments to add 100 million tonnes steel capacity.

Out of the total investment commitments, Rs. 80,000 crore would be foreign direct investment (FDI) for two large projects — Posco in Orissa and Mittal Steel in Jharkhand. A third of these capacities would come from public sector units (PSUs) with SAIL having an investment plan of Rs. 34,000 crore and Rashtriya Ispat Nigam Ltd. (RINL) an investment plan of Rs. 8,000 crore.

Prashant Ruia, Managing Director, Essar Steel, said, "Steel demand remained firm throughout the year. All the sectors of the economy have registered a healthy growth thus contributing to the steel demand, though the prices softened. Going forward, we can expect the growth rate to be in the region of seven-eight per cent. While the availability of raw material was not an issue, the prices remained firm in 2005. We expect prices to remain firm during the first half of 2006. Automotive and infrastructure sector are expected to be the key drivers for growth."

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