World production of crude steel in H1 of 2011 registered a 7.6% growth over last year. India, still fourth in the race, achieved only 4.8% growth against a 9.6 % growth by China calculated on a much higher base.

During the first three months of the current FY, steel consumption in the country has nosedived to only 1.5%, although the production growth of finished steel is higher, may be in response to a 72% growth in exports. The current market perception for steel is subdued in the country following a declining trend in manufacturing, particularly in steel-intensive subsectors like capital goods, consumer durables and drop in construction activities due to monsoon and lack of commencement of fresh projects.

Market sentiments for flat products are a bit depressing compared to the long, although cost pressure from coal and iron ore may compel the steel producers against lowering of prices for capturing demand Would exports be able to sustain the production tempo under such a scenario?

Some of the countries have practiced export-oriented production strategies. Japan, the leading exporter in 2010, exported nearly 40% of its production. Russia and South Korea observe similar trend and Turkey exports more than 55% of its production.

The average export coverage in steel in India can be put at less than 10% and the balance 90% goes to meet the domestic demand. Last year, Chinese exports reached a little over 6% of its production and domestic demand was the prime driver of steel production.

Indian steel has over the past few years attempted to shed off its tolerable quality mark in the global market and been able to create a niche market for its products like heavy plate from Bhilai, CR/GP products from Tata, API grade plate from Essar, HR Coils/GP from JSW, Parallel flange beam from JSPL. These export efforts must be strengthened and the movement of steel cargo and handling the shipment at the ports to be given a priority status in order to conform to the delivery schedules agreed with the customers abroad.

Till such time domestic market gets a push by the favourable climate and the enabling environment contributed by more investment friendly monetary policy, more export of steel may be undertaken to sustain the level of production.

This would be particularly necessary if the additional few millions of steel emerge on completion of brown field expansion by major steel producers by year end.