R Krishna Das
With the easing of lockdown, steel production in India is likely to pick-up though demand may not witness a similar corresponding surge due to the seasonally weak September quarter.
Domestic steel production has fallen to record low levels in April 2020 due to the lockdown. It is now showing recovery. Production of crude steel improved from 3.2 million tonnes (MT) in April 2020 to 5.8 MT and 6.8 MT in May and June 2020 respectively.
Leading rating agency CARE expects domestic steel demand to recover only post monsoon led by improvement in infrastructure activities and expectation of increase in automobiles production. “Demand from construction sector is expected to take longer to recover,” it says, adding recovery in domestic demand has been slow due to migration of labour, supply-chain disruptions, prevailing lockdown in many cities etc.
The steel price is likely to remain checked at least till the September 2020 quarter. However, higher exports, lower raw materials prices and better availability of domestic coal is expected to provide much needed relief to steel sector.
With China finding it better to import steel than iron ore and coal at present prices, the steel manufacturers have reason to smile. Increased domestic supply of steel has led to fall in imports and a surge in exports. India exported 1.3 MT and 1.5 MT of finished steel in May and June 2020, respectively, up from 0.4 MT in April 2020.
Imports, on the other hand fell, sharply from 0.4 MT in April 2020 to 0.2 MT in June 2020. China and Vietnam accounted for nearly 64% of total steel exports from India in June 2020, substantially higher as compared to just 6.2% in June 2019. On the other hand, UAE and Nepal that together accounted for 40% of total steel exports from India in June 2019 saw a drastic fall to 8% in June 2020.
