Mumbai, June 23 (KNN) Lower input costs and improvement in domestic realizations due to reduction in imports could be the laying stone for gradual recovery in Indian steel industry, said Care Ratings in its report.

The report further said that the  Indian  steel  industry  has  been  struggling  over  last  couple  of  years  due  to  rising imports particularly from China, relatively subdued domestic demand, excess domestic capacity and decline in realizations due to availability of cheaper imported steel.

However, there have been some positive developments in recent times with government intervention in the form of imposition of minimum import price (MIP) in February 2016  for  a  period  of  six  months  and levy of 20% safeguard  duty  in  September  2015,   which  has  been  further  extended  till  March  2018. 

These  measures  have arrested  the  rise  in  imports  to  a  large  extent thereby leading to improvement in realizations for the domestic players. Furthermore, the lower prices of key  raw  materials  have  also  supported  the  improvement  in  realizations  of  steel  products, it said.

The continuation  of  protection  measures  for  some  more  time  and sustained  revival  in  the  demand  would  remain crucial for the prospects of domestic steel industry in the medium to long-term.

The domestic finished steel consumption grew by 4.3% in FY16 as against a growth of 3.9% during FY15. Looking  at  monthly  data,  the  growth  rate  of  3.7%  in  finished  steel  consumption  in  March  2016  is  attributed  to  improved  demand  with  infrastructure  industries  growing  at  6.4%  in  March  2016  as against 2.9% in January 2016

Report also said that after continuous decline, the global steel prices have strengthened largely driven by increase in prices in China which is considered to be on account of production cuts and restocking for meeting the demand of peak season in Q2CY16. 

The  price  differential  between  imported  steel  and  indigenously produced  steel  post implementation of MIP provides the much needed headroom to major steel producers for increasing prices between Rs.3,350 and 5,025 per ton depending on various types   of the product. (KNN/AR)