India's spending on infrastructure is expected to drive the steel industry's growth in 2020, according to the nation's largest private steelmaker, aiding revival when a slowing economy has caused demand for the alloy to contract.
There have been some green shoots of recovery in October and November, Seshagiri Rao, joint managing director at JSW Steel Ltd., told BloombergQuint in an interview. Among industries such as real estate, automobile, capital goods and manufacturing, Rao expects demand from the infrastructure sector to show signs of recovery first.
Steel demand grew 8 percent year-on-year in 2018-19, but slowed to 6.5-7 percent in the first quarter of 2019-20 and 2.5 percent in the second quarter. It contracted by 0.25 percent in September, Rao said.
Iron Ore Supply
On Nov. 29, the Ministry of Environment, Forest and Climate Change mandated fresh environment clearance for the mines whose leases are expiring by March 2020. All potential winning bidders will have to seek environment clearances before starting production.
That came as a surprise as potential bidders expected existing environmental clearances for mines to continue for 2-3 years on a provisional basis till the new lessee received the permission. Steel Authority of India Ltd. had earlier said the steel industry may face disruption after March 2020 when a number of mining leases expire.
Rao, however, expects the government to come up with some option for a temporary environmental clearance for the winning bidders to avoid a supply disruption. Inventory build-up from Odisha-based iron ore mining companies and government permission for SAIL to sell iron ore from its captive mines may be enough to avoid any disruptions at least in the short term, he said.
WATCH | JSW Steel's Seshagiri Rao sees green shoots of demand revival
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