India’s steel demand grows marginally at 0.6% in FY14

India’s steel consumption grew at a four-year low rate of 0.6 percent in FY'14 to 73.93 million tonnes (MT) mainly impacted by a prevailing economic slowdown and high interest rates. As steel demand derived from construction and automobile sectors, the performance of the steel industry is therefore largely dependent on overall economic growth of the country. Steel consumption in the country grows by 1.2 to 1.3 percent of the GDP growth. Construction sector accounts for around 60 percent of the country's total steel demand while the automobile industry consumes 15 percent. Both sectors were plagued by a slowdown in the economy. Indian economy’s growth slowed down to a decade low at 4.5 percent in FY13 and 4.6 percent during the first three quarter of FY'14. Furthermore, financial year 2013 was also not good for the steel industry as well with steel consumption growing by a mere 3.3 percent on account of subdued demand. However, domestic steel consumption grew by 5.5 percent in FY'12 and 9.9 percent in FY'11. Domestic steel consumption is likely to remain under pressure in coming future on account of ongoing economic downturn. The government has been taking various measures to enhance the domestic steel demand. In previous month, it has relaxed the norms for import of steel and its products amid subdued domestic production. Over the past few years, domestic steel industry has been struggling with increased input cost, leading to decline in steel production. Further, low iron ore production, a main raw material for steel production, mainly in Goa and Karnataka region has not only hampered the capacity utilization of various steel players, but also led to significant rise in the cost of iron ore in the domestic market due to limited supplies.