The domestic steel demand needs to grow at a compound annual growth rate of 9 per cent over the next decade to meet 160 kg per capita steel consumption target envisaged in the National Steel Policy

The domestic steel demand needs to grow at a compound annual growth rate (CAGR) of 9 per cent over the next decade to meet 160 kg per capita steel consumption target envisaged in the National Steel Policy (NSP).

Launched in 2017, NSP also aims to ramp up the country’s crude steel production to 300 million tonne (MT) by 2030-31.

Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, Icra said, India’s current per capita steel demand of 76 kg is not only significantly below the world average of 233 kg per capita, but also remains the lowest among Brazil, Russia, India, China and South Africa (BRICS) nations.

To take the country’s steel consumption close to NSP target of 160 kg per capita in FY2031, the domestic steel demand would need to grow at a CAGR of 9 per cent in the next decade, the expert said in an Icra report on Wednesday.

He further noted, “This is almost double the growth rate achieved in the decade gone by. While achieving this milestone will be challenging, it is not impossible, as the country has been able to demonstrate growth of a similar magnitude in the past.”

According to the ratings agency, India’s steel demand growth has been remarkably resilient despite the persistent macroeconomic instability caused by elevated inflation and bursting of the Chinese housing bubble (real estate crisis), which has caused a 30-45 per cent correction in global steel prices in current fiscal so far.

“Domestic steel demand climbed by 11.1 per cent year-on-year (y-o-y) in the first half of financial year 2022-23, continuing a robust growth trend that began in FY22, when it grew 11.4 per cent y-o-y helped by a low base effect. The result is that India is now the world’s fastest-growing major steel market,” it said.

The government’s strong infrastructure push, and an expected pick-up in private capex will play a crucial role in determining whether India is able to achieve the NSP target. Another key enabler of the domestic steel demand is the government’s capex spend.

Infrastructure and construction account for the largest share of around 62 per cent of domestic steel demand, and the government’s infrastructure development plan in core sectors like railways, roadways, energy, urban infrastructure, multimodal logistics parks, affordable housing, and drinking water connectivity would remain the backbone of India’s steel demand growth prospects.

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