India Steel Demand May Rise 10% on Infrastructure, Rastogi Says

June 12 (Bloomberg) -- India’s steel demand may gain as much as 10 percent this fiscal year, almost double the pace previously estimated, as the government spends more on infrastructure, Steel Secretary Pramod Rastogi said.

“Based on the economic factors, it will not be a surprise to see a surge in consumption,” Rastogi said in an interview in New Delhi, revising his May 18 forecast of 6 percent growth this year. Demand, which almost disappeared last year, rose 6 percent in the past two months, he said.

Prime Minister Manmohan Singh’s administration, which returned to power without the help of communist allies last month, is reviving state projects and restoring a rural jobs program that’s lifting demand in villages and towns. The government plans to spend $8.95 billion this fiscal year to build networks of roads, telephones, electricity and irrigation.

“There’s considerable scope to increase public expenditure, particularly on infrastructure projects and that would not lead to inflation,” Singh told lawmakers on June 9. “That is the right way to deal with the international slowdown.”

As demand grows, Indian steelmakers are expected to double their combined capacity in the next three years, Rastogi said in his Udyog Bhavan office yesterday. Capacity is expected to increase to as much as 124 million metric tons by 2012 or at least 100 million tons in the “worst-case scenario,” he said.

“The steel companies have started speaking a positive language as they are seeing a rise in demand,” Rastogi said.

Steel Production

India produced 56.4 million metric tons of steel in the year ended March 31, little changed from 56.1 million tons the previous year, according to the data provided by the Joint Plant Committee, a data dissemination body under the steel ministry.

Imports of steel rose 21 percent to 528,000 metric tons last month from a year earlier, Rastogi said, citing figures compiled by the ministry. Some countries are offering prices lower than those in India, which is leading to the spurt in imports, he said, without identifying the nations.

Producers from Ukraine and Russia are willing to sell in India at below-market prices, Seshagiri Rao, chief financial officer at India’s third-largest producer JSW Steel Ltd., said in an interview yesterday. China’s move to offer a rebate on steel exports will also hinder the Indian steelmakers, he said.

Falling Prices

Coking coal contract prices, which surged to a record $300 a ton last year, have declined 60 percent since April. Steelmakers in Japan and Rio Tinto Group, the world’s third- largest mining company, agreed to a 33 percent cut in iron ore prices, settling for 97 cents a dry metric ton unit.

India’s government last month rejected a plea by Steel Authority of India Ltd., the nation’s second-biggest producer, JSW and rivals to impose a 25 percent so called safeguard duty on imports in addition to the existing 5 percent import tax.

“We are watching, though from the data it’s clear that China is not a threat at the moment because very little steel is coming from there,” Rastogi said. “Also, Indian companies are trying to lower costs to be more competitive.”

A venture formed by state-owned steelmakers is scouting for coal mines in the U.S., Canada, Australia and Mozambique to secure supplies for Indian companies, he said.