India's steel demand indicators giving mixed signals: Analysts

New Delhi: Even as analysts are upbeat over the expected above normal monsoon and higher GDP growth, they have raised concerns over the slow pace of public and private sector projects and funding constraints, which they feel can have an adverse impact on the steel demand in India.

According to global ratings agency Fitch, the consensus expectations of better monsoon rains and higher GDP growth in 2016-17 fiscal may boost demand, but several indicators remain weak.

"For example, the share of stalled projects has risen steadily since June 2015, to 12.3 per cent by end of March quarter in 2016. This was mainly due to the private sector, where more than 20 per cent of investments are stagnant," it added.

It said Nikkei Manufacturing Purchasing Managers' Index for April stood at 50.5, implying almost half of respondents did not see the business environment improving relative to the previous month.

Similarly, Platts' latest global market outlook report said: "Steel demand in India remained weak during May, affected by the severe drought that continues to ravage much of the country, delays in launching public works projects and funding constraints."

As per Steel Ministry's latest Joint Plant Committee (JPC) data in April, India's steel consumption plunged by 29 per cent year-on-year to 5.76 million tonnes (MT) over March 2016.

"The drop reflected weak demand across all end-user sectors but mills complained they were still waiting for orders to start flowing from numerous infrastructure projects announced by New Delhi. The government blames lack of private funding for the delays," Platts said in the report.

Inventories are rising, both at mills and distributors. Overall steel stocks at Indian mills rose to 912,000 tonnes during April, up from 683,000 tonnes over the previous month, it added.

As per the JPC data, India's steel consumption fell to 5.75 MT in April, the lowest since the same month in 2015. Consumption in the world's third largest producer was 7.31 MT in March this year.

JPC attributed the fall to "influence of a declining supply side (as both production for sale and imports declined)".

The consumption in the month under review was the lowest since April 2015, when it was around 5.45 MT.

According to an official data, the country consumed 6.84 MT steel in February and 6.98 MT in January this year.

A senior steel company official said if the decline in quantity continues for a quarter then it is a matter of concern.

"Infrastructure projects in public sector are not coming as expected due to various reasons including funding. Similarly, private sector too is facing fund crunch. Industry is now waiting for the monsoons, which if good will boost spending, especially in rural areas," he added.