India is the brightest spot for steel sector till 2019: Moody's

India’s steel sector consolidation will drive improvement in the industry’s capacity utilisation levels and mute the pressure on profitability, Moody's said.

Published: 11th September 2018 01:21 AM  |   Last Updated: 11th September 2018 03:55 AM   |  A+A-

A worker observes an electric furnace inside a steel factory on the outskirts of Jammu. (File Photo | Reuters)

By Express News Service

BHUBANESWAR: With domestic steel consumption rising at least 5.5 per cent to 6 per cent every year, tracking strong GDP growth of 7.3 per cent to 7.5 per cent, India will be the brightest spot for the steel sector over the next 12-18 months, according to global rating agency Moody’s Investors Service. Moody’s noted that robust steel demand from the construction, infrastructure and automotive sectors will keep prices of end-product high even as rising costs for key inputs, coking coal and iron ore pressure profitability. 

However, the spill-over impact on Asian steel demand through weaker economic growth would be greater if the US implements recently proposed 25 per cent tariffs on $200 billion worth of Chinese imports.

Meanwhile, India’s steel sector consolidation will drive improvement in the industry’s capacity utilisation levels and mute the pressure on profitability,” it said, adding that a minimal new steel capacity expected to be commissioned until 2021.

Tata Steel’s acquisition of Bhushan Steel Ltd will underpin the increase in Tata’s steel shipments by over a third. “We expect a mid-single-digit increase in EBITDA per tonne for Tata Steel’s Indian operations over the next 12 months. Moreover, Tata Steel’s backward integration in iron ore and coking coal augurs well in times of rising input prices,” the statement added. “JSW’s EBITDA per tonne will also increase by a mid-single digit,” Moody’s said.

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