Orientation and export prospects of Indian steel

India is currently a major export hub, exporting many products to developed countries. During fiscal year 2021, India exported 17.3 metric tons (MT) of steel to the world, which is an increase of 56% over previous years. However, the path towards this has been considerable, with events like the financial crisis, which struck two decades ago, gradually helping India to export many products. Prior to that, India had imposed numerous restrictions in the form of tariffs and quotas on the import and export sector. There had been no globalization before 1991 and India had closed all trade barriers.
What happened in 1991 and what was its impact?
In 1991, India suffered a financial crisis, with not even having enough funds to manage its import commitments for more than fifteen days. India even suffered to manage the payment of its debt to the IMF. All of this forced India to lift its trade restrictions and therefore integrate its economy into the global economy. India has removed all major obstacles.
After opening up the Indian economy to the world, India faced many problems at first as domestic producers were unable to compete with strong and wealthy producers in developed countries. Moreover, developed countries have exploited India using their dominance and power. But all of this is now history and would not be repeated. How are we so certain, you ask?
Well, little by little, India has become one of the main exporters of many products, with domestic producers now able to compete with the world. India’s orientation towards steel exports and a few sectors in India are now reaping the benefit of being part of the globalized economy. Let’s explore this sector and its prospects in detail.
India has a capacity of 144 MT of crude steel as well as a domestic demand of 95 MT in fiscal year 2021 and continues to grow. Even after suffering a setback in 2020 due to the pandemic and the strain it created around the world in the third and fourth quarters, the export sector is on the rise again. The pandemic has resulted in a high number of casualties, job losses and income opportunities.
There has been a prolonged lockdown. Steel factories were operating even during the lockdown, but at a slower pace. As the global economy began to open up again, demand for end-user segments started to rise again from the third quarter of fiscal 2021. But with the second wave of the virus, the export sector started again. to suffer, but the impact this time around was less than last year due to the arrival of the COVID-19 vaccine. The vaccine acted as a savior for the steel export sector.
When almost all other sectors failed, the steel industry was able to maintain its exports in fiscal year 2021. There was an export of 17.3 MT, which is almost 56% more than the years previous ones. The average capacity utilization of 72% is still maintained by the Indian steel industry.
Besides exploring the steel export market in the name of sluggish domestic demand, another thing that helps producers is the price differentiation of steel exports. The HRC is currently available from Mumbai at 67,500 per tonne, while the recent export from the Indian plant at 1030 to 1050 / tonne CFR UAE. The market merchant price is about 1500-2000 / tonne lower than the OEM offer or government project price and therefore the price depends on the demand of the end user sectors.
Steel and Indian economy:
There is no doubt that the development of infrastructure is very important for the progress of any economy. The development of infrastructure increases the economy of a country. Obviously, steel consumption is widely viewed as an indicator of economic growth. The crucial role of steel in the development of our economy was explained in a report from the National Council for Applied Economic Research (NCAER). He said that the steel sector in India has great potential to contribute to the overall development of India. It has multilateral demand, from the country itself as well as from other countries, as well as in the form of exports.
India has experienced a very high growth rate of steel exports, year over year. It is currently one of the largest steel exporters in the world, it all started after globalization. It created many opportunities and helped India to maintain and increase its foreign exchange reserves. Not only the export, but the steelmaking factories are also labor intensive. This means that they absorb a large part of the country’s labor force and therefore provide them with jobs, thus contributing to the increase in the country’s national income as well.
Future prospects for the steel industry
According to Indian Steel Association (ISA), the steel industry is on the rise and its domestic and foreign demand will increase further in the years to come. The development of infrastructure in any country automatically increases the demand for steel. Huge scope for the growth of steel industries in India with increasing infrastructure development. Countries around the world are making huge strides in infrastructure development today as it helps boost their economies.
The steel industry in India benefits from it due to its good quality and relatively low price. The automotive sector as well as the railway sector are also on the rise today. It has also created a strong demand for steel and its by-products, thus directly contributing to the growth of the steel industry.
Current situation and opportunities:
However, the current situation caused by the COVID-19 pandemic has created many uncertainties. Even though consumer demand for durable goods has not shown a seasonal impact, domestic demand for steel has so far been weak. Automakers have worried about declining sales as people are now concerned about the uncertainty of the pandemic and are not currently demanding these durable goods.
However, the export of steel was not significantly affected. In the first two months, India exported 2.96 MT of steel worth Rs 17,812 crore and exceeded last year’s exports by 86%. Speaking of domestic demand, clear data will be known once consumers submit seasonal demand.
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