Last few years have been really testing ones for the entire iron & steel vertical. In most parts of the world, the finished steel demand seemed to be growing slowly or stagnataed, especially in the western world.
This millennium saw the emergence of Asia as the growth engine of the world for manufacturing and infrastructure industry. It consists of the regions like Indian sub-continent, China, SE Asia and the Middle East. All these regions are extremely promising in terms of manufacturing sector and infrastructure development projects. With China producing and consuming more than half the quantity of finished steel produced in the entire world, naturally the focus of iron & steel industry slowly shifted to Asia. In other parts of Asia, numerous infrastructure projects were successfully implemented which consumed a huge quantity of steel & metals.
Today, world’s growth engine seems to have slowed down. China is trying to close down the outdated capacity, Middle East region’s infra projects getting on hold due to depressed oil prices and liquidity crunch and SE Asia not showing the expected growth rate of the industry. Overall the situation is far from satisfactory. India has its own set of problems. The present government till now could not pass the land acquisition bill which would have facilitated Greenfield expansion programs of iron & steel sector. This situation has in a way restricted the free growth of iron & steel sector in the country. Two years back it was non availability of iron ore which was the main hurdle in the industry’s growth. The Supreme Court had imposed ban on the iron ore mines in the states of Karnataka and Goa which drastically affected the availability of this vital input. Now, even if the availability of iron ore has improved, it is the demand stagnation which has emerged as a new problem. The capacity utilization of Indian mills has improved from last year but still in my opinion the average may not exceed 75 %. Needless to mention that such low average would also affect the bottomline and put severe pressure on finances.
Overall its testing time for iron & steel sector, globally, in Asian region and in India too !