Steel mills mull production cuts, forwarding maintenance period as domestic demand slows

New Delhi, June 27 Hit by poor demand and slowing export orders, Indian steel mills are looking at ways to reduce excess stock while some are actively exploring production cuts spanning a cumulative 10–15 days across July and August.

According to trade sources, one of the major primary steel producers already had three days of closure, citing maintenance, in June and is mulling another 10 days of closure for maintenance, with each closure being for a two-to-three day duration.

Some mills are looking at a 10–12 per cent production cut in July and August too.

The country’s monthly steel production is around 10 million tonnes, with 81 per cent coming from private players – JSW, Tata Steel, AMNS, JSPL, etc and the remaining 19 per cent from PSU majors like SAIL and RINL.

Secondary steel makers have already announced production cuts while sponge iron mills are operating at reduced capacity of 60-70 per cent in key markets of Chhattisgarh. In Karnataka, many have closed shop because of poor demand. Sponge iron is a key raw material for steel-making.

“Typically, steel production and sales are slow during monsoon season. . But this year, mills are hit by poor demand and lack of export orders. So we wouldn’t want to incur additional operating costs or be left with high stock piles during the rains. Hence, some of us are bringing forward annual maintenance period to June. Around 10-15 days of production cuts across industry are expected in the next two months,” a mill operator told BusinessLine.

Post imposition of export duty, Indian steel is costlier by at least 10 per cent, over Chinese offerings. And this after steel prices fell globally following recessionary pressures.

In case of domestic markets, the benchmark hot rolled coil price (HRC) is hovering around ₹61,000– 64,000 per tonne, down by over ₹15,000 per tonne versus ₹78,000 per tonne it commanded in April.

Excess stocks

India’s average monthly steel consumption has been around 6 million tonnes and in absence of exports, mills anticipate a stock pile up. Moreover, dealers have been slowing down on purchases as they “anticipate a further fall in prices”.

Hence to clear such excess stocks, some mill owners have reached out to dealers asking them to pick up offerings at current spot prices. Credit notes will be issued if prices fall further – which means mills would make adjustments or provide additional offering to that extent in case of future orders.

“Indications are strong that July could see some more dip in prices, if the slack in demand continues,” a mill owner said.

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