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Low single-digit steel consumption growth continues: Similar to the
trend seen in the last few months, steel consumption continued to
remain tepid with flat y/y growth in August (+2% m/m) and YTD
growth of 1.3%. Consumption growth in August was the lowest in this
fiscal quarter. However, finished steel production for the month of
August was up 17% y/y and m/m which, in our view, could be due to
restatement of historical data. YTD steel production was up nearly 10%
y/y. We remain surprised by the wide variance in the consumption and
production growth trends. The large increase in production compared
with muted steel demand points to an increase in the inventory levels in
the system.
Increasing steel exports provide some relief: Steel exports continued
the upward trend, more than doubling y/y in the month of August
(+6% m/m) and increasing to 1.82MT YTD FY12 (up 57% y/y).
Imports for the month declined 11% y/y, while YTD steel imports were
~45% lower. In our view, this was aided by the import substitution
driven by domestic flat offers at a discount to the import parity prices
over the last few months as players kept prices unchanged through Mayearly
August. Based on the monthly data, India turned a net exporter of
steel in August (net exports of 45kt in August). In our view, much of the
improvement in steel volumes reported by the companies would be
driven by the higher exports and helped partly offset the weak demand
condition in the domestic market.
Some price increase seen in August; More to come?: Flat prices have
started creeping up in August with the rollback in discount earlier this
month and more recently as per media reports (steelguru, ET), steel mills
are likely to increase prices by Rs750-1000/MT in September driven by
higher raw material costs (especially with the recent iron ore ban in
Karnataka impacted CoP for several steel mills in South India) and also
the strengthening of the INR. Seasonal improvement in demand post the
monsoon should also help support any price hike taken by the steel mills.
CIS and China HRC prices have improved modestly over the last month
to around $700-710/MT.
Benign base effect ahead: Growth rates from Sep onwards should
benefit by the lower base over the next year (except for Mar) and
therefore, Y/Y growth trends should improve going forward
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Low single-digit steel consumption growth continues: Similar to the
trend seen in the last few months, steel consumption continued to
remain tepid with flat y/y growth in August (+2% m/m) and YTD
growth of 1.3%. Consumption growth in August was the lowest in this
fiscal quarter. However, finished steel production for the month of
August was up 17% y/y and m/m which, in our view, could be due to
restatement of historical data. YTD steel production was up nearly 10%
y/y. We remain surprised by the wide variance in the consumption and
production growth trends. The large increase in production compared
with muted steel demand points to an increase in the inventory levels in
the system.
Increasing steel exports provide some relief: Steel exports continued
the upward trend, more than doubling y/y in the month of August
(+6% m/m) and increasing to 1.82MT YTD FY12 (up 57% y/y).
Imports for the month declined 11% y/y, while YTD steel imports were
~45% lower. In our view, this was aided by the import substitution
driven by domestic flat offers at a discount to the import parity prices
over the last few months as players kept prices unchanged through Mayearly
August. Based on the monthly data, India turned a net exporter of
steel in August (net exports of 45kt in August). In our view, much of the
improvement in steel volumes reported by the companies would be
driven by the higher exports and helped partly offset the weak demand
condition in the domestic market.
Some price increase seen in August; More to come?: Flat prices have
started creeping up in August with the rollback in discount earlier this
month and more recently as per media reports (steelguru, ET), steel mills
are likely to increase prices by Rs750-1000/MT in September driven by
higher raw material costs (especially with the recent iron ore ban in
Karnataka impacted CoP for several steel mills in South India) and also
the strengthening of the INR. Seasonal improvement in demand post the
monsoon should also help support any price hike taken by the steel mills.
CIS and China HRC prices have improved modestly over the last month
to around $700-710/MT.
Benign base effect ahead: Growth rates from Sep onwards should
benefit by the lower base over the next year (except for Mar) and
therefore, Y/Y growth trends should improve going forward
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