India's Steel Output Expands For Third Straight Month in May As Steel Makers Eye Higher Spreads

India's steel production expanded for the third month in a row in May, as domestic steel producers are expecting the spread to improve by the second quarter of fiscal 2024.

Giving impetus to increase steel production is also the higher capex outlay on infrastructure development by the government, according to Antique Stock Broking.

India's steel production grew 4.1% year-on-year to 11.2 million tonne in May and 5.7% year-on-year to 56.4 million tonne so far this year, according to the World Steel Association's data. This was the third straight month of steel output growth, as India's production rose 3.2% in April and 2.7% in March. An increase in production comes with expectations of an improvement in domestic steel margins.

International coking coal prices have fallen by almost a third from the last quarter of FY23 to $229 per tonne, the brokerage said. The improvement in spreads emerging from this drop in coal prices is expected to come in with a lag by the September quarter, once the high-cost coal inventory is exhausted for steel producers, it said.

Antique Stock Broking expects the current demand momentum to sustain with estimated growth of 6–7% by the September quarter with "a higher outlay on infrastructure and impetus by the government". WSA also expects India's steel demand "to show healthy growth" of 7.3% in 2023 and 6.2% in 2024.

A plausible Chinese stimulus package to revive its struggling real estate sector, coupled with Chinese media reports of flat steel output, may boost Indian steel exports, Antique said. WSA expects Chinese steel output to grow by 2% this year and remain flat next year after declining by 3.5% in 2022.

India's steel output has grown the most this year among the top 10 steel-producing countries, according to WSA data. China, the largest steel producer, faced an output decline of 7.3% year-on-year in May while growing 1.6% in the first five months of 2023 to 444.6 million tonne.