Domestic steel demand to grow in second half of FY20: Crisil

Crisil expects some improvement in global market sentiment and domestic demand growth in the second half, however, a weak first half will still see to a 5-6 per cent contraction in realisations this fiscal, a Crisil report said.

Mumbai: Crisil ratings on Wednesday said it expects some improvement in sentiments in the global steel market as well as domestic demand growth in the second half of the financial year 2019-20.

"Crisil expects some improvement in global market sentiment and domestic demand growth in the second half, however, a weak first half will still see to a 5-6 per cent contraction in realisations this fiscal," a Crisil report said.

This comes after a robust 7.5-8 per cent growth in the last two fiscals.

The domestic steel industry, Crisil said, is expected to witness a mid-cycle slowdown at 4-5 per cent this fiscal, owing to muted construction investments and a weak automotive market. Global steel prices, it said, dropped 13 per cent in the first eight months of 2019 due to weak demand, an unseasonal jump in global inventory levels (up 35 per cent through August) and trade tensions.

The agency further highlighted that prices fell 10 per cent from Rs 42,000 per tonne in January to Rs 38,000 per tonne in August 2019. "This was despite a whopping 56 per cent run-up in global iron ore prices during the same period," it added.

"While in the near term, the sector shall witness rising leverage, however, support in the form of prevailing anti-dumping duty across steel products (for a period of five years) will help avoid the free fall of prices and profit as seen back in fiscal 2016.