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PrintTata Steel Ltd produced 2.2 million tonnes (mt) of saleable steel in the July-September quarter, up 18% from last year, the company said on Wednesday.
Earlier, JSW Steel Ltd reported crude steel production at 985,000 tonnes in August, up 29% from last year. Steel Authority of India Ltd (SAIL) produced 6.5mt saleable steel in the first half of fiscal 2014, up an annual 4%.
Production growth at these top steel companies would seem to show high steel demand in the country, but analysts say fundamental concerns remain even ahead of the festive season, with little signs of demand picking up in a big way from major consuming sectors of construction, automobiles and consumer durables.
These steel companies, then, are likely showing high production and sales owing to some diversion of products to the export market as well as closures and scale downs in the small scale steel sector that dominates the steel industry, analysts said.
“In the case of JSW and some others there is deviation of products to the foreign markets,” said Giriraj Daga, senior research analyst at brokerage and equity research Nirmal Bang. “It is also possible they may have taken market share from the small units.”
Steel companies have been selling steel at competitive prices overseas because of the rupee’s double digit depreciation against the dollar this year.
India’s five top steel companies—SAIL, JSW, Tata Steel, Essar Steel India Ltd and Jindal Steel and Power Ltd—produce about 34mt of steel out of the country’s total 77.6mt annual production. This leaves about half of the total production in the lands of hundreds of small steel companies, some of them producing very small quantities such as 500,000 tonnes and 1mt of steel.
Though data is not available, analysts say the high cost of production and freight and low availability of raw material such as iron ore have hit the small scale sector hard. Their suffering has helped large steel companies in grabbing their market share, though they also face similar difficulties.
The large steel companies are carrying large debts but still are seen expanding and taking away more share from the small scale sector units. The top six companies, including Bhushan Power and Steel Ltd, have a combined net debt of about Rs.1.53 trillion, Mint research and available data show.
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