Economy

Steel demand to fall 65% in June quarter

Our Bureau Mumbai | Updated on June 09, 2020 Published on June 09, 2020

The extended lockdown to contain the Covid pandemic has dealt a severe blow on the steel industry. With construction and manufacturing activity coming to a standstill and return to normalcy a distant proposition, the industry’s prospects have dimmed in line with the economy at large.

Steel manufacturers are now focussing on managing liquidity and cash flows in the near term, to tide over the 60-65 per cent fall in demand in the first quarter of this fiscal.

Steel manufacturers are hopeful that the incentives and extended credit cycle to MSME and downstream sales channel players will ensure their business continuity, according to Crisil Research survey.

While most steel companies expect demand to recover in the December quarter, the industry is gearing up for over 15 per cent fall in demand this fiscal.

The incremental government support towards facilitating exports, along with tax and logistics concessions will help to tide over this crisis, it said.

Lowered demand

Prospects of the construction sector, which accounts for over 65 per cent of steel demand in India, have dimmed considerably with the onset of the pandemic. Most of the infrastructure projects are expected to be deferred even after the lockdown is lifted due to labour shortage and lower infrastructure spending by the Central and State governments on account of lower tax collections and focus on social sectors.

No major support in demand is envisaged from other sectors, including capital goods, with weak industrial production and continued slowdown in automobiles sector due to cautious discretionary spending, it said.

Steel companies’ utilisation will to range between 50-60 per cent in this fiscal due to demand slowdown, logistic constraints and labour shortage.

Dearth of truckers and lack of labourers for loading/ unloading and movement of goods will impede transportation of raw material and finished goods.

Despite ports and mining activities being functional during the lockdown, 45 per cent of the steelmakers had seen disruptions in raw material supply, including iron ore and coking coal.

Published on June 09, 2020
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