India's steel import curbs raise prices hit consumption

[MUMBAI] India's steel consumption dropped in June for the first time in at least 15 months, as curbs on imports raised prices in the domestic market.

Demand fell 4.3 per cent to 6.8 million metric tons from a year ago, the first drop since at least April 2015, when the Steel Ministrybegan to publish monthly data. Steel output in the world's third biggest producer was up 2.4 per cent in June to 8.2 million tons. Steel importsfell a third month after the government imposed barriers to protect domestic mills from a glut of cheap steel on world markets spurred by exports from China, the world's top producer. Inbound shipments in June declined 33 per cent to 597,000 tons from a year earlier, according to provisional data from the ministry. For the April-June period, imports were down 31 percent to 1.8 million tons.

India's imposition of floor prices and safeguard taxes on imports has left end-users struggling to absorb an increase in local prices over the last couple of months and producers are finding it difficult to sell their products, said Goutam Chakraborty, an analyst at Emkay Global Financial Services. Seasonal factors are also weighing, he said.

"Construction activity will be low in July-August because, seasonally, consumption is weak in the monsoons and a pick up is likely only after September if the rains are good," Chakraborty said by phone from Mumbai. "The only worry is that supply is growing at a faster rate than demand." Over the three-month period, production grew 3.8 per cent to 24.5 million tons from a year ago, while consumption was little changed at 19.9 million tons.

Steel use in India is estimated to grow to 210 million tons by 2025-26 from 90 million tons in the last fiscal year ending March, S. Abbasi, joint secretary at the Steel Ministry, said on Tuesday. The nation is banking on a building boom as the economy rebounds and the government invests in new railways, power plants and housing.

BLOOMBERG