March 17, 2017 9:01 pm JST

India poised to emerge net exporter of steel as February output jumps

MUMBAI (NewsRise) - India's steel output surged in February, helping boost exports and setting the stage for the nation to become a net exporter of the alloy for the first time in three years.

Steel imports had swelled in the last two financial years as producers in China flooded the local market with cheaper products. That pushed prices down to a six-year low and triggered losses at producers such as Tata Steel. India had last year imposed several curbs on the import of cheap supplies to help domestic steel companies.

Finished steel output grew a record 13% in February to 8.84 million tons, provisional government data showed. Steel exports more than doubled to 0.756 million tons in the month, while imports declined 46%.

"A lot of capacity has already been added in the past year. Most of them are now going through a ramp up process," said Sanak Mishra, secretary general of the Indian Steel Association. At the end of 2016, India had a production capacity of 122 million tons, while the output stood at around 95 million tons, Mishra said.

According to the data, steel output between April and February increased 11% from a year earlier to more than 98.95 million tons. However, consumption grew only 3.4% during this period.

Exports rose 78%, while imports plunged about 39% in the 11 months to February.

Between April and February, Tata Steel produced the maximum, followed by Steel Authority of India, JSW Steel and Jindal Steel and Power. Output at these companies together grew 19% to 52 million tons, Mumbai-based brokerage Emkay Global said in a note last week.

"With the ramp up in newly commissioned facilities, domestic steel production continues to rise," the brokerage said. "Demand, however, has been tepid despite much optimism. This is encouraging the companies to focus on exports."

Emkay said it expects India to be a net exporter of the alloy this fiscal year.

Shares of Indian steel makers have jumped in recent days. Tata Steel, the nation's largest, rose as much as 6.2% in the last two days, touching a 52-week high of 508.45 rupees on Friday. JSW Steel stock added 11.2% in the last one week.

Indian companies have been boosting output, betting on a surge in local demand, as Prime Minister Narendra Modi seeks to boost local manufacturing. However, demand has remained weak amid slowing private investments, prompting steel makers to turn to exports.

According to media reports last week, Chinese authorities have set a target of 50 million tonnes of steel capacity closures in 2017, a move that is expected to choke the glut in the market and improve the alloy's international prices.

China had last year given a massive credit stimulus to boost its slowing economy, stirring up demand for the metal and pushing up their prices.

Amid rising prices and production, Tata Steel reported its first profit in five quarters in the October-December period. JSW Steel also posted a profit in the quarter against a loss a year earlier.

Shares of Tata Steel rose 0.58%, while that of JSW Steel lost 0.23% and Steel Authority of India fell 0.31% in Mumbai trading on Friday. The benchmark S&P BSE Sensex gained 0.21%.

--Dhanya Ann Thoppil

Asia300

Tata Steel Ltd.

India

Market(Ticker): BOM(500470)
Sector:
Industry:
Non-Energy Minerals
Steel
Market cap(USD): 7,639.05M
Shares: 971.21M

Steel Authority of India Ltd.

India

Market(Ticker): BOM(500113)
Sector:
Industry:
Non-Energy Minerals
Steel
Market cap(USD): 3,674.87M
Shares: 4,130.07M

JSW Steel Ltd.

India

Market(Ticker): BOM(500228)
Sector:
Industry:
Non-Energy Minerals
Steel
Market cap(USD): 7,331.1M
Shares: 2,417.22M

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