The profitability of Indian steel companies such as Tata Steel and JSW Steel will
outperform regional peers' owing to rising domestic demand and the government's
protectionist measures like minimum import price and antidumping duty. This was the view
expressed by global ratings agency Moody's Investors Service in a newly released report on
the Asian steel industry, "Steel Asia:Lower Earnings Keep Outlook Negative".
In addition, the expected rampup of Tata Steel's greenfield Kalinganagar operations and
JSW's brownfield expansion will help raise the companies' earnings in 2016.
The ratings agency said steel demand in India will outpace the regional average as the country's GDP growth of around 7.5 per cent in
2016 and 2017. India's reform and policy support for infrastructure and manufacturing, as well as increasing urbanization, will drive steel
consumption.
In India and Southeast Asia, Moody's said it expects yearonyear steel demand to increase by a mid to highsingledigit percentage in
2016 and 2017. But that won't be enough to offset the aggregate effect on the region from the decline in China.
Production in other major Asian steelproducing countries will also decrease, except for India. Japan, Korea and Taiwan, which export
around 40 per cent50 per cent of their steel output, have reduced their production due to flat domestic demand, the lower demand from
China, overseas price competition and trade barriers. India, which accounts for 8 per cent of Asian production, will increase steel
production to meet rising domestic consumption, though not enough to offset the aggregate decline in regional production.
Demand from India and Southeast Asia will increase, but will be insufficient to offset the decline in China, which accounts for about 70 per
cent of Asian steel consumption. Chinese production will likely contract 3 per cent4 per cent in the next 12 months.
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