Inspite of tough market conditions, lower raw material prices is a positive signal.

The month of November 2011 was not very optimistic as far as market demand was concerned and according to available data, the demand has fallen to 2.9% during the period of April - October 2011 compared to 8.5% recorded in the same period of last fiscal. High interest rates and inflationary pressures prompted Indian consumers to postpone their decisions as far as purchases of cars and homes are concerned. With the new capacities coming on stream in the next twelve months at least another 20% capacity will be added bringing in a total demand - supply mismatch in the Indian steel market. If this situation continues, there is bound to be a cut back in production by many of the steel producers across the board and most of the plants will be forced to run their mills at 70-75% of their installed capacity. However, in spite of such tight market situation, JSW Steel reported an 18% increase in crude steel production during November 2011 with a production of 600,000 tonnes compared to 507,000 tonnes recorded in November 2010. The company registered a 46% increase in production of long products compared to the corresponding month in the last fiscal.
On the other hand Vizag Steel Plant (RINL) registered a net sales figure of Rs.897 crore during the month of November 2011 compared to Rs.679 crore achieved during November 2010. In terms of tonnage, VSP registered a net sales of 200,000 tonnes in November 2011 compared to 1,80,000 tonnes recorded in the same month during the last fiscal.
Thus, the situation can not be termed as totally depressing, but it is grave and the market will continue to be under pressure in the days to come.
As far as the new developments are concerned, within a period of one month Steel Authority of India Ltd. (SAIL) is likely to finalise the joint venture with Kobe Steel for a 0.5 million tonne steel plant in West Bengal for special steels unit. The total investment for this unit is likely to be around US$ 400 million or roughly Rs.2000 crore. The other significant development is the clearance of the ArcelorMittal's mining project in Jharkhand by the Environment Ministry, thus paving the way for production of iron ore with a capacity of 5 million tonnes per annum.
While the steel industry is going through turbulent times globally, the softening of iron ore and coking coal prices is perhaps a good indication that the industry will see further reduction in raw material prices which in turn will help the steel industry in achieving higher margin realization in the days to come.