Indian steel output growth outstrips demand in August

India's steel demand growth eased in August because of an economic slowdown and seasonal factors.

Steel consumption edged up by just 1.7pc from a year earlier to 8.6mn t last month, according to provisional data from the steel ministry. The growth rate more than halved from a year-on-year increase of 1.7pc in July.

The demand growth was outstripped by a 2.4pc rise in output to 8.45mn t in August from a year earlier, which may lead to a further increase in unsold inventories that could pressure steel prices in the near term.

Steel exports surged by 37pc year on year to 983,000t last month.

Demand typically slows during the June-September monsoon season as rains hit construction and transport activity. But demand may come under more pressure in the coming months from a deepening economic slowdown that has cut automobile sales and output, hit construction and infrastructure activity and led to a rise in unemployment.

Some smaller mills may already have suspended or severely curtailed operations, while even larger producers may have to curb output if demand does not increase in the next couple of months.

The Argus-assessed Indian domestic hot-rolled coil (HRC) price has fallen by 15pc since the beginning of the year to Rs36,500/t on 6 September. Prices are likely to decline further as consumers negotiate hard for discounts on listed prices, market participants said.

Indian mills have turned their attention to exports to overcome the fall in demand and local prices. Competitive offers by Indian mills were heard this week at €430/t cif Italy in European markets, and at $457-465/t cfr Vietnam.

But India's total steel imports increased sharply by 27.5pc from a year earlier to 856,000t in August. Most steel importers are being bought by subsidiaries of Japanese and South Korean automakers and consumer durable companies seeking higher grades, said a Mumbai trader.

India's total crude steel output edged up by 2pc to 45.98mn t during April-August, while consumption rose by 6.3pc from a year earlier to 42.6mn t in the period.