Year-wise steel demand trend

 

 

120 15.0%
8.0% 8.8%
100 is 10.0%
80 5.0%
0.0%
60
-5.0%
‘a -10.0%
20 (20)to(17)% FARR, -15.0%
0 -20.0%
Fy13. FY14 «FYIS «~FYI6.«FYI7«-FYI8. = FYI9.««FY20_—«FY2IP FY24P

mmm Steel Demand (MTPA) —=®=% growth y-o-y
Source: JPC, CRISIL Research

Construction to continue dominating steel’s end-use mix

Steel demand end-use mix

Steel demand from B&C accounts for 35-40% of the total steel demand. While, in the near term, B&C demand
will be weak, with affordable housing being the only saviour, over the medium term, the housing market will see
soft revival, led by rural housing, affordable housing, and commercialization of tier III/V cities. On the other hand,
the real estate sector is expected to remain weak amid the pandemic. Growth in the industrial segment is also
expected to be muted.

Share of steel Growth in Growthin Growth in

consumption FY20 FY2IP FY22P
Building & construction 36-40% (20% © (20-25)% © 8-10%
Infrastructure 25-30% 35% = (10-12% 12-14%
‘Automotive 10%  (16-18)% — (20-25)% 17-19%

 

Source: CRISIL Research

Over the long term, though, the prospects seem bright. The government has targeted 10-12 million urban and 29.5
million rural houses in seven years under the Pradhan Mantri Awas Yojana. Overall progress was 30% in urban
housing as of March 2020, with 3.3 million houses constructed. In rural housing, 10 million, i.e. 65% of the target
houses (second phase target of 16 million rural houses), have been completed.

Infrastructure segment to lead steel demand

The infrastructure segment is currently the second-largest segment, in terms of steel offtake, comprising 25-30%
share in overall end-use mix. However, within infrastructure, the roads and highways sector is expected to take a
mighty blow from the nationwide lockdown to contain the pandemic, which has pushed back a much-anticipated
economic recovery this fiscal by bringing to a standstill movement of people and goods, and all major industries
in the first quarter. While the government’s announcement to restart work on all national highways is a step in the
right direction, CRISIL Research’s interactions with stakeholders indicate it will be some time before normalcy
returns. Also, in fiscal 2021, execution is expected to decline on account of low awarding in fiscal 2020.

While fiscal 2021 will see declining progress in infrastructure activities, long term drivers remain intact.

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