Steel demand may raise after the Budget's stress on Urban & rural Infra development

The union budget proposals of finance minister Pranab Mukherjee, will indirectly boost the overall demand for steel. In particular, the
decision to raise outlay on urban development and housing by 75% to Rs 5,400 crore and an additional 25% of plan outlay for rural infrastructure, has come as a shot in the arm for domestic steel companies.

Base metals analyst at Angel Broking, Reena Walia Nair said: "Though no specific mention has been made with regard to steel, growth in infrastructure will obviously translate into growth for the steel sector as well. We have already seen a surge in equity stocks following the FM’s budget speech. The market seems to have responded very positively to the budget. Going forward, steel stocks are likely to look up too." On Friday, Tata Steel shares gained up 1.11% to Rs 573.65, while the Steel Authority of India (Sail) stock jumped 3.26% to Rs 218.45 on the BSE.

"Apart from a higher outlay on housing and rural infrastructure, incentives to individuals for investing in infrastructure bonds will also spurt steel demand,"Anil Surekha, director finance, Ispat Industries which makes high value steel used in durables.

Commenting on the budget proposals, Steel Authority of India Limited chairman S K Roongta said: "The changes in income tax slabs will leave more disposable income in the hands of consumers. This will in turn boost demand for consumer durables which use value added steels. Moreover, the reduction in home finance rates for loans upto Rs 10 lakh will also be beneficial for housing sector and hence lead to higher consumption of steel."

"This budget is largely neutral for the steel industry and Tata Steel. But it does contain other growth measures which may have an indirect effect on the steel demand," Tata Steel managing director H M Nerurkar said.

"The focus on infrastructure spending, allocation of funds for railways and highways, emphasis on power sector growth, focus on rural and urban development augurs well for the steel industry," Vikram Amin, excecutive director, Essar Steel said.

However, the budget proposals will lead to a hike in excise rates from 8 to 10% which is slated to make steel costlier. "This step was largely factored in by the industry," Mr Surekha of Ispat Industries said. Also, the proposed clean energy cess of Rs 50 per tonne on coal will lead to a hike in steel companies’ coal bill. In case of Sail, it will lead to an additional burden of Rs 50-100 crore.