India: Steel and cement companys may see surge in demand

India: Steel and cement companys may see surge in demand
Published: 17 February 2009

Steel and cement companies are expected to see a surge in demand due to fund allocation to the Bharat Nirman scheme, a time-bound plan for building rural infrastructure. But the companies are clear that this can only happen if projects take off on time. The interim budget has allocated INR40,900 crore to the scheme.

"The two major inputs that go into almost every infrastructure project are cement and steel, and Bharat Nirman is all about providing facilities to the people. Work on new steel projects, which was held back because of demand slowdown, will be expedited," said JSW Steel executive director (commercial) Vinod Naval.

However, Jindal Steel and Power director Sushil Maroo believes the worth of the announcement can only be judged once work starts. "The impact of the allocation will only be known once projects are laid out on the ground. As of now, it’s more of a psychological demand boost. The demand for long products has already started going up with the rise in construction activities."

Commencement of work will mainly increase the demand for long steel products such as TMT bars and structurals. Long steel products constitute about 60 per cent of the country’s total steel production. In the past few months, the government has taken steps to safeguard the domestic industry from cheap imports and increase consumption of domestic steel.

However, Ispat Industries MD Vinod Mittal said the steel industry was expecting more from the budget. "The economy is facing extraordinary times... Globally, countries have already announced huge stimulus packages to save employment and revive demand. The budget was a good opportunity for the government to announce initiatives in this direction," he said.

The announcement has come at a time when big players are on expansion mode. Ambuja Cements MD AL Kapur told ET the incremental capacities may take care of demand from Bharat Nirman. While the cement industry has seen growth in dispatches over the past two months, the possibility of strengthening of prices is high, said an analyst with a foreign brokerage.

"It’s a positive interim budget, but the big question is, can the new government bring in change?" asked Cement Manufacturers’ Association president and Shree Cement MD HM Bangur. "The industry is waiting for the budget in June-July," he added.