India’s rising steel demand is making companies starry-eyed

Steel companies are behaving like children in a candy store. Their appetite for distressed steel assets remains robust, despite worrying external events such as trade wars and the resultant scaling down of global growth projections. Despite the fact that investors are worried about steel companies taking on more debt than they should, it has not melted the resolve of India’s steel companies. World Steel Association, a global industry body, released its short-range demand outlook this week, saying what was already known that India’s growth ranks highest among major steel-consuming countries, but the gap is widening sharply. Six months ago, World Steel had projected India’s demand to grow by 5.5% in 2018 and 6% in 2019. In its latest report, those numbers have been revised to 7.5% and 7.3%, respectively. The organization expects steel growth to remain robust, as the economy is recovering after the twin shocks of demonetization and the roll-out of the goods and services tax. It said that demand will be supported by improving investment and infrastructure. Indeed, steel demand growth has been robust in the current fiscal year. Excluding China, global steel demand is expected to increase by 2.1% in 2018, followed by 2.7% in 2019. This is lower than the April estimate, possibly due to the effect of the global trade war on economic growth. Europe and the Americas are projected to see slower demand growth, while Africa and the Middle East are expected to do better.