Steel sector upbeat on realty recovery
With lowest home loan rates in last 15 years, the real estate sector is getting a boost; Automobile industry is experiencing a waiting period to roll out new products in the market, owing to supply chain and logistics issue
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New Delhi: Steel industry is expected to pick up the pace and witness stabilization of prices and production in the next financial year as experts believe that the new demand influx in the allied sectors such as the real estate and automobile industry will result in an overall boost.
In the recent months, real estate projects, in terms of constructions, have resumed operations. Although residential real estate is getting a boost in the recent months, with lowest home loan rates in 15 years, steel manufacturing sector, at present, is supplying construction steel such as TMT bars for stalled, pending ventures only. Given the upward trend the real estate experiencing all over the country, steel sector is also expecting a subsequent rise in demand for raw materials.
"In real estate, there have been huge inventory overhead for the last 5 to 6 year and this was pan India. If you look at the last two years, there have no major project announcements. There was an inventory overhead, so there was a demand and supply mismatch," Arnab Kumar Hazra, deputy secretary general, Indian Steel Association (ISA), told BizzBuzz.
"When you have inventory of unsold flats, then of course there is a problem with working capital. The inventory overhead is correcting itself, and within couple of years it will be down to levels where new projects will start getting announced. Right now, there is huge focus on project completions, so the demand (of steel) is sufficient," he added. In the lines of steel manufacturing for automobile sector, Hazra said: "Price is a functional demand and supply factor. It's a free market economy. Steel is a free market good. So, if there is demand, prices will sustain. The automobile sector did badly in 2019 and 2020 but, trend in last few months have been strong. Even in February the year end growth was 20 percent. So, automobile sector has been a surprise up-pick. We don't know if it is a pent-up demand or it is a movement on the cyclical growth par. This will require another three to five months of data to come in."
The automobile, as per the experts, is also experiencing a waiting period to roll out new products in the market, owing to supply chain and logistics issue, constrains in procurement of raw materials and overall rise in demand post the pandemic.
