India’s domestic demand for steel is expected to grow at 10 percent through 2022 riding on the government’s investment focus on construction of roads, ports, airports and railways, Moody’s Investors’ Service said in a note on Tuesday, May 17.
The note said that input costs have been on an upswing owing to the Russia-Ukraine war and companies have been wary of the higher raw material costs eating into their margins. Steel prices have been no stranger to this phenomenon. The prices of iron ore and coking coal, two key components of producing steel in the commonly-used basic oxygen furnace (BOF) method, have surged recently and are expected to remain elevated as the conflict further tightens supply.
However, Indian steelmakers with higher self-sufficiency in raw materials are currently better positioned. For example, Tata Steel and JSW Steel have either complete or high self-sufficiency in iron ore for their Indian operations. These two companies are more shielded from these risks given their backward integration into the production of key steelmaking inputs, Moody’s Investors’ Service said.
Also, JSW Steel has 13 mining licenses, with estimated resources of 1.35 billion mt of iron ore deposits in Karnataka and Odisha, and this will help the company meet close to half of its iron ore requirements for its Indian operations, Moody’s said. It expects the strongest demand for steel in the APAC region to come from India, followed by South Korea, Japan and China.