Most people expected the Indian economy to kick-start after the ruling party was returned to power with such an overwhelming majority in the recent national elections. Unfortunately, various factors such as a credit squeeze and a sudden drop in demand for cars have led to the worst performance in many years for the auto and steel industries. If you add in the impact of an already-sluggish real estate market, steel producers are facing an extremely challenging time.
In the recent central budget, Bangladesh’s government announced VAT of 5% on scrap/steel. The way this is to be levied could cause cash-flow problems for steel producers and also increase the cost of finished steel. On a more macro level and taking a medium to long-term view, the Bangladesh government’s decision to increase spending on infrastructure will be positive for steel demand over the next three to five years.
International scrap markets continue to be volatile and, over the last three to four months, prices seem to have moved up and down within a band of around US$ 20-25 per tonne. Volatility is making it difficult for Indian steel mills to time their buying as price trends and market sentiment are heavily influenced by outside factors such as Turkish buying and geopolitical changes.
Zain Nathani
Nathani Group of Companies (IND), Vice-President of the BIR Ferrous Division
Country
India