Covid-19 blues: Domestic steel manufacturers focus on exports to stay afloat

Twesh Mishra New Delhi | Updated on July 24, 2020 Published on July 24, 2020

During April and May 2020, the demand was negligible due to complete lockdown in the country.   -  Getty Images/iStockphoto

Industry hopeful of substantial domestic demand recovery from Q3

Domestic steel and stainless-steel producers are relying on exports to keep their ships afloat as the Covid-induced lockdown has stunted product demand. According to sector representatives, there has been some recovery, but the government needs to clearly spell out the support it is offering to aid demand recovery.

Commenting on the status of the steel sector after the lockdown period, Secretary-General of Indian Steel Association Bhaskar Chatterjee said, “During April and May 2020, the demand was negligible due to complete lockdown in the country. For June, the economy opened partially and subdued activities started with a hope of recovery in demand.”

“Steel producers are hopeful of substantial domestic demand recovery from the third quarter of financial year 2021,” he added.

Commenting on the general strategy with which the industry is going to handle the aftermath of Covid-19 pandemic, Chatterjee said, “Currently, steel producers are exporting their products to the extent possible till the full domestic demand recovers.”

Stainless-steel producers had a similar experience but are noticing a sharper demand recovery.

“Market demand in May picked up to about 30 per cent, in June it was even better at around 60 per cent. We feel that by September end or so, Stainless Steel should come back to normalcy. However, we must be careful about the re-lockdowns in processing, trading, and consuming centres. If the re-lockdowns do not continue for long, we strongly feel that by September end or so, demand should come back to pre-Covid levels,” said Vijay Sharma, Director, Strategy, Government Affairs and Business Development at Jindal Stainless.

“We were able to encash an opportunity in exports during May-June because of the trust and relationships we have built,” he said.

Some improvement

A report by CARE Ratings said that consumption of finished steel also showed improvement in May and June 2020 over April 2020. Finished steel consumption jumped 304 per cent in May 2020 over April 2020 and continued to show improvement in June 2020.

“However, compared to a year ago levels, consumption was still down sharply by 40.8 per cent in June 2020. Share of export in total finished steel production rose from 3 per cent in June 2019 to 27 per cent in June 2020. Large-scale domestic steel producers resorted to higher exports to tackle tepid demand in the domestic market,” the report added.

Highlighting the opportunity in sight, Sharma said, “There will also be more demand for domestic stainless steel in the auto components, pharmaceuticals, and electronics, as Chinese imports are dissuaded. The sustained focus on health and medical infrastructure will also be an opportunity for stainless steel.”

Talking of the hit due to the lockdowns, Sharma added, “During the lockdown months, demand for stainless steel remained subdued for automobiles. But it has recovered well for the two wheelers. Demand from railways for coaches, wagon and metro never stopped. In the process industry, there have been some challenges but demand for consumer facing products such as utensils has taken a hit.”

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Published on July 24, 2020
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