Team News Riveting
Indian steel industry has staged a strong recovery in the last few months on the back of improving domestic demand resulting in consumption going up by a whopping 96 per cent in September 2020 quarter compared to June 2020 quarter.
According to rating agency CARE, production of crude steel rose by 59 per cent in the second quarter. The industry also managed to significantly lower the year-on-year (y-o-y) fall in quarter (Q2) of financial year (FY21), signalling return of normalcy in the sector.
Crude steel production fell by just 7 per cent y-o-y in the September 2020 quarter, compared to 43 per cent y-o-y fall in the June 2020 quarter. Consumption of steel also fell by 11.4 per cent, much lower than the 52 per cent y-o-y fall registered in the preceding June quarter.
The outbreak of COVID-19 pandemic and the subsequent nationwide lock down had severely affected demand and production of steel in the country in Q1FY21. The lockdown in the months of April and May had crippled domestic demand and steel players were forced to look at export markets to keep their inventory in-check.
The finished steel exports as a percentage of total finished steel production peaked during April-August 2020 to average 21 per cent compared to 8 per cent in the corresponding period of FY20 and 6 per cent during the same period in FY19. However, with the unlocking of the economy from June 2020 onwards, domestic demand staged a strong V-shape recovery and exports declined gradually.
A pick up in domestic demand from the infrastructure activities, pipe and tubes manufacturing, automobiles, and consumer durables sector ahead of the festive season has led to increased steel consumption and higher restocking demand. Capacity utilisation levels of crude steel improved with the unlocking of the economy and recovery in demand both domestically and internationally.
An up-cycle in international steel prices is expected in the second half of the FY21 due to increased steel consumption mainly by China on the back of a stimulus package unveiled by the Chinese government which is keeping demand for industrial metals high.
