The World Steel Association has reported a decline in global steel production. Rakesh Arora, managing partner, Go India Advisors shared his views and outlook on the industry in an interview with CNBC-TV18.

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“China is the main producers of steel accounting for 50 percent of global production. Whatever happens in China is reflected globally. While the production is declined by 0.6 percent in October, year-to-date Chinese steel production is up 7.6 percent. So it is just a minor blip but normally in the winter season, Chinese production does start to get clamped down by the government. I wouldn’t read too much into this steel production decline, I would say it is a cyclical trend that we are seeing,” he said.

Arora added: “Steel prices went through a bit of a downcycle in the first 6-8 months of 2019 and they bottomed out in September-October and since then there has been a price recovery of almost 10-12 percent. Normally, when prices are declining, consumers tend to destock, so the inventory level in the channel system have gone down and as prices started to recover, restocking is happening. So the real demand may not change much but the apparent demand starts to look much better.

“As the Chinese New Year is slightly early this year, the restocking is more accelerated this time around. So only after the Chinese New Year is over, we will get real trends for 2020."

On demand projections, he said: “From Indian perspective, we are awaiting to hear from the government on some kind of scrappage policies for autos. That could be a big spur up for auto companies, which is a mainstay for Indian steel majors and secondly infrastructure sector probably next year can do better than this year. Hopefully both infrastructure, construction, and auto demand next year would support Indian demand to 6-7 percent.

“Prices have already gone up a little bit and the outlook is positive at least till January. So I would assume that the uptrend will continue for some more time,” Arora said.