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Tuesday, 05/19/2009 2:11:07 PM

Tuesday, May 19, 2009 2:11:07 PM

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Steel Picture In India Brightens

May 19 (Bloomberg) -- India’s steel demand will accelerate this year as the incoming Congress party-led government increases investments in infrastructure, following its best showing in an election in two decades, JSW Steel Ltd. said.

“The steel industry’s performance is dependent on how the economy grows and now with a stable government more thrust will be placed on infrastructure,”

Joint Managing Director Seshagiri Rao said yesterday in an interview in Mumbai. “Those programs announced earlier will now be accelerated.” Orders from the construction industry will drive a 6 percent gain in overall sales this fiscal year, up from 1.3 percent last year, he said.

Indian steelmakers are expecting

Prime Minister Manmohan Singh’s re-election to spur investment in roads, ports and bridges and continue a rural jobs program that lifted demand in villages and towns. Bharat Heavy Electricals Ltd. said it expects as much as $1.5 billion of new power-equipment orders in the first quarter as pending government projects are cleared.

“Demand for construction grade steel will jump as we expect investments to increase sharply in infrastructure,” said Bharath S., an analyst at Sundaram BNP Paribas Mutual Fund.

Operating profit at Mumbai-based JSW, India’s third-biggest steel producer, will improve this quarter from 3.57 billion rupees ($75 million) in the previous three months, Rao said, without giving specific numbers. Operating profit was 8.9 billion rupees in the fiscal first quarter last year.

JSWshares fell 3.4 percent to 471.25 rupees at the close of trading today in Mumbai. The key Sensitive Index fell 0.5 percent to 14,213.73.

Stimulus Package

Congress won the most seats in an election since 1991, clearing the ruling party to form a government without needing the support of communist parties that frustrated plans to entice foreign investment in Singh’s first five-year term.

The government had announced three stimulus packages since December and spending worth $8.95 billion this fiscal year to build networks of roads, phones, electricity and irrigation.

“There won’t be other pulls and pressures on the government so they will be focusing now on growth and governance,” Rao said.

JSW’s crude steel production climbed 60 percent last month as sales of construction grade products surged 78 percent.

To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net.
Last Updated: May 19, 2009 06:17 EDT




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