India's steel sector fundamentals are likely to weaken in FY20 under the double impact of lower prices and higher production costs due to weak demand. Metals companies will be affected by muted demand from the auto sector, although government projects in affordable housing and infrastructure are expected to improve the demand scenario, according to the latest industry report.
“In the domestic market, India's steel sector is likely to see strong demand from affordable housing and infrastructure sectors, supported by various government schemes and projects. However, demand from the automotive sector is likely to be muted, ”the report says. A key area to look out for is the mines' auction by March 2020, where any delay could disrupt domestic steel production in fiscal 21, Ind-Ra said in a report.
The report says that coking coal supplies are likely to be limited in the coming months as major Australian miners cut production. However, with India, Australia's largest coking coal importer, maintaining monthly import levels, the agency expects coking coal prices to remain stable in the near term over the medium term. However, Ind-Ra expects a bearish trend in iron ore prices in the coming months.
While ore prices rose 48% year-on-year to $ 135 per tonne in July 2019, global ore supplies declined due to continued supply disruptions from the largest producer, Vale. Production only showed signs of recovery in July 2019.
