The reprieve for domestic steel majors such as SAIL, Tata Steel and Jindals may be short lived as analysts predict the demand growth seen in last three months will not sustain the year 2009-10 and consequently cut short the dream of price revival."The surge in steel demand in the March quarter was a correction over the October-December period when consuming firms had virtually stopped buying the commodity and is not sustainable for the whole fiscal," consulting firm Booz & Co Principal Piyush Doshi said.
Steel demand grew in the range of 10-15 per cent in the January-March quarter after declining by about 14 per cent in the previous quarter.
JSW Steel chief Sajjan Jindal termed the recent growth in demand as a "feel-good factor" for the sector, while steel secretary P K Rastogi called it a "silverlining" for the economy.
Analysts, however, differed with the 'over-optimism' and said the double-digit growth in the steel sector could not be realistically maintained as the economy is going through a rough phase amidst the global industrial downturn.
"The double-digit growth is not sustainable as it requires the economy to grow at 9-10 per cent which is not going to happen anytime soon," Ernst & Young Partner Naveen Vohra said.
Despite projecting a gloomy picture for the steel sector, the analysts said the recent increase in offtakes is a good news for the industry, struggling against slump in demand.
Country's top steel firms like SAIL, Tata Steel and JSW reported double-digit growth in sales and production during January-March quarter due to spurt in steel demand.
Even as the firms managed to clear their inventories and resume normal output in the third quarter, sales realisation remained a worry as steel prices crashed by over 60 per cent to USD 400 a tonne level compared to the early 2008 levels.
While admitting steel prices were low in the past few months, JSW Steel Vice-Chairman and MD Jindal said the rates are likely to remain flat throughout 2009-10 in sync with the global trend, where demand is still to improve.
With offtakes plunging in the west, he voiced for urgent measures to curb cheaper imports for protecting the domestic firms and maintain the sustainability of the present demand.
"Government should levy anti-dumping and safeguard duties to counter cheaper shipments especially coming from non-market economies like China to maintain the sustainability of the present surge in steel offtakes in the country," he said.