Domestic steel demand may grow at 5 per cent in H2, 3 per cent in FY14

MUMBAI: Domestic steel demand is likely to rise at around 5 per cent in the second half of the current fiscal owing to spurt in construction activity with an overall growth at 3 per cent for the entire financial year, experts said.

They also added that support to steel demand from revival in capital expenditure is likely to be minimal in H2 of FY14.

"Steel demand in the second half is likely to be around 4.5-5 per cent on the back of pick up in construction activity with the end of monsoon. However, we don't expect much support from revival in capital expenditure during this period," Senior Analyst (metals and mining) of Angel Broking, Bhavesh Chavan told PTI here.

He said the brokerage firm estimates the steel demand to grow around 3 per cent this fiscal with less than one per cent growth in the first half (H1).

Due to economic slowdown, steel demand is subdued since last fiscal on the back of absence of major infrastructure projects coupled with lesser automobile sales.

In the last fiscal, steel demand had grown by 3.3 per cent against the targeted 8 per cent.

On the category of steel products, which will see demand growth in October-March period, Chavan said the demand would be more in the long-products segment as these products are mostly used in the construction industry.

Earlier, rating agency- India Ratings- had said that steel demand would remain muted during the second half of the calendar year.

Another analyst with rating agency, Care Ratings said the demand environment is likely to remain subdued due to slowdown of the economy.

"Growth of the steel industry follows the GDP. So, unless investment cycle picks up, we don't see any major change in the demand environment," Assistant General Manager (Corporate Ratings) of Care Ratings, Puneet Bhatia said adding that the demand is pegged to grow around 3.5 per cent this fiscal.

He also said that recent price rise in steel products by some steel firms, following the depreciation of rupee, might not be sustainable unless demand environment revives.