According to the Economic Survey, 2008-09 has been a watershed year for the Indian iron and steel industry. The survey said the industry has been hit hard by the spiraling cost of imported coking coal or metallurgical coke.
According to the provisional estimates of the Survey, consumption of total finished steel was almost flat (-01%) at 52.05 million tonne for 2008-09 compared to the previous year. The imports for 2008-09 of 5.72 million tonne were down by 18.7% compared to the previous year and exports at 3.66 million tonne down by 27.9%.
The H1 of 2008-09 had seen a rapid rise in consumption. Prices and profits of steel producers, spurred by huge investments were planned for capacity expansion accordingly.
The survey said domestic demand had also been impacted, in particular, by the sharp reduction in demand in some of the leading end user segments of steel dependent on credit financing. On the supply side, the liquidity crunch negatively impacted steel investors’ sentiments.
The survey added that the annual rate of 9.2% growth of crude steel production 2003-04 to 2007-08 came on the back of capacity expansion, mainly in the private sector plants and higher utilization rates.
It said that despite having diversified product mix to include sophisticated value added steel for the auto sector, heavy machinery and infrastructure, Indian steel suffers from the high ash content of locally available metallurgical coal.
Survey further added that growing dependence on imported coal and delays in getting leases for iron ore mines and constraints in land acquisition and transport infrastructure were other concerns.
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