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India`s auto output slump pressures steel demand

India`s auto output slump pressures steel demand

News is brought to you by Mr. Shailesh Karia

Published on 15th May, 2019

India`s monthly automobile output in April dropped by 16pc from a year earlier to 2.36mn passenger vehicles, the worst such slump in eight years.

Passenger vehicle sales dropped by 17pc to 247,541 units in April, according to the Society of Indian Automobile Manufacturers (Siam).

"In the last 10 years, we have not seen anything like this when all vehicle segments are down," said Siam deputy director Sugato Sen.

"Lower consumer spending, especially by salaried individuals, is hurting sales across steel consuming sectors, such as appliances and automobiles," said Quesrow Consultancy managing partner Sachin Shetty. Spending decisions have been postponed, both by corporates and individuals, to wait for the new Indian federal government to take office in June.

The fall in automobile output will continue to pressure demand for auto-grade steel, a key source of business for large Indian integrated steel producers such as Tata Steel and JSW Steel.

Rising vehicle stocks with auto producers have dented auto output and steel demand, a Delhi-based special steel supplier said. Its monthly steel sales to car producers in April was lower by 1,500-2,000t against the previous year.

The automotive sector has been witnessing softer demand conditions since October 2018, according to the Indian Steel Association. "Going by the recent trend and a strong base effect, growth is expected to slow down in the first half of 2019."

The drop in sales of Indian cold-rolled coil (CRC) and coated sheets during the 2018-19 fiscal year ended 31 March is indicative of the slump in the country`s automotive steel demand. CRC consumption fell by 7.6pc to 5.87mn t, while colour-coated sheet sales were lower by 6.8pc to 1.58mn t.

Fuel subsidies, lower lending rates and favourable taxation policies are expected from the new government to boost consumer spending and in return steel demand, said market participants. 

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