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Indian steel consumption set to slow down: JSW Steel

Thursday, 28 July 2011

Growth in India’s real consumption of finished steel could slow down to 7-8% year-on-year during the April 2011-March 2012 fiscal year, compared to 10.6% the previous fiscal, according to JSW Steel.

“There are clear signs of slowdown across all sectors in the country,” company director Seshagiri Rao tells Steel Business Briefing. “Credit growth is poor, real estate and construction projects are being delayed. The investment cycle has taken a backseat.”

Further set to decelerate growth is the Reserve Banks of India’s (RBI) staunch anti-inflationary stance at the expense of industrial growth. On 26 July, the RBI lifted its lending rate – also known as the repo rate – by 50 basis points to 8.0% following its first quarter monetary policy review. This closely follows the 25-bps rate hike the bank announced in early June. India’s annual rate of inflation rebounded to 9.44% in June from 9.06% in May.

Market watchers are also waiting to see whether and how persisting inflation and rising interest rates would affect the Indian government’s plans for fresh investments in the infrastructure and construction sectors this fiscal. New projects are expected to be announced during the monsoon session of the parliament, scheduled to begin on 1 August.

India’s real consumption of finished steel grew only 1.5% y-o-y to reach 16.391m tonnes during the April-June quarter, according to provisional data from the steel ministry’s Joint Plant Committee. JSW’s Rao expects consumption to reach 7-8% y-o-y this fiscal, in line with GDP growth forecasts of 7-8%.

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