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India's steel exports are expected to continue rising in the current fiscal quarter, since the election season has dampened domestic demand for the alloy.
Some analysts believe that India will soon be a net exporter of steel as domestic demand slows in the run-up to the national election. During election season, governments are prohibited from making significant announcements or decisions that could affect voting, hence reducing government spending on infrastructure and other building projects.
India's steel exports reached one million tonnes in February, an increase of more than 21% from the previous month. In spite of this, during the first 11 months of FY24 (April–February), the nation was a net importer of the alloy at 0.9 MT (million tonne).
India, which was a net exporter of steel till October, started to turn a net importer in November, when imports for the first eight months of the year (April-November) stood at 4.3 MT, 0.3 mt more than the exports.
Rating agency Icra Ltd expects domestic consumption demand growth to slow to 7-8% in FY25 from an estimated 12-13% in the previous year. Citing data of domestic steel companies during state assembly elections last year, Ritabrata Ghosh, vice president, sector head, corporate sector ratings, at Icra, said trends since December reveal a marked slowdown in consumption growth to 6-7%.
“Our channel checks with some regional steel players indicate a lull in demand in states that had assembly elections in November. These early signals hint at demand remaining soft over the next two quarters as the government spending could moderate around the union election period," Ghosh said. “Therefore, domestic mills are looking at increasing opportunistic exports during this period as demand back home remains soft."
"Although exports have recorded a consecutive rise, our overall status remains that of a net importer... The recent export increase can be linked to a decrease in domestic demand, likely stemming from a slowdown in infrastructure project implementations—a typical occurrence before a general election," said Ranjan Dhar, chief marketing officer, ArcelorMittal Nippon Steel India.
Analysts at BNP Paribas India also believe growth in steel exports won't be sustained for long, and they attributed the rise to the European Union import quota, which was exhausted in January.
“The export volumes seen in recent months are unlikely to be sustained with EU import quotas now exhausted. And export markets (are) generally not being favourable, as Chinese exports remain at highest levels since CY16 and Chinese export offers are materially lower than Indian offers," according to analysts at BNP Paribas India.
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