Domestic demand to be lower in the Q1FY22

Domestic demand for steel had picked up pace in the second half of FY2021, however, the second wave of coronavirus has mildly hit demand from certain sectors, says a report by CARE Ratings. We expect domestic demand to be lower in the Q1FY2022 however in Q2 demand is expected to return with unlocking of restrictions. Capacity utilisation rate of user industries will start to improve as more people get vaccinated and return to work in the coming months thereby pushing steel demand. Steel producers are likely to cover up the lost production in the subsequent months and therefore there is no change in our annual crude steel output forecast of 9-11% growth for FY2022. Having said that, domestic steel prices continue to remain at a sharp discount to international steel prices which indicates there is room for further price hike.