Posted on 18 Nov 2020
After braving through the inevitable demand slump caused by the COVID-19 pandemic, India’s steel industry has emerged onto a path of recovery. Resilient, as the material, the industry bounced back with the country’s crude steel production reaching 6.9 million tonnes (MT) in June, according to the Ministry of Steel. At, 6.9 MT, the production was 17.7 percent higher over May 2020. Further, steel production in India rose to 7.1 MT in July from 6.9 MT in June of 2020.
With a net loss of USD 559 million for the second quarter ended June 30, 2020, ArcelorMittal termed the quarter as the “most difficult period in its history”. Fortunately, Chairman Aditya Mittal said that operations at ArcelorMittal Nippon Steel India’s (formerly Essar Steel) Hazira plant in Gujarat are now running at full capacity with further visible recovery in the horizon.
In terms of prices, the retail prices of HRC (hot-rolled coil), CRC (cold rolled coil) and rebar increased by 1.43 percent, 1.69 percent, and 2.17 percent respectively in June, caused by the easing of the lockdown along with an increase in exports during the month. Bombay Stock Exchange (BSE) Sensex and BSE Metal Indices registered an increase of 6.1 percent and 4.7 percent, respectively, in the month of June 2020, indicating a demand uptick post lockdown, as per The Economic Times.
According to rating agency ICRA, India’s finished steel exports grew sharply by 140% in the fourth month of FY2021 while the export growth for both semis and finished steel products was even higher at 207% during the same period.
Contrastingly, steel imports de-grew by 42% during July FY2021 and kept India a net steel exporter. Export volumes are forecast to reduce going forward due to rising domestic demand and reduced price-competitiveness in the export market, owing to the successive price hikes from July onward.
Further, the operating margins of Indian steelmakers declined on a quarterly basis to 16.5% in Q1 FY2021 from 26.3% in Q4 FY2020 on account of a sharp fall in steel realizations and sales volumes. The industry’s interest coverage fell on a quarter-on-quarter basis to 1.6 times in Q1 FY2021 from 3.7 times in Q4 FY 2020.
Looking forward, the government has also set a target to scale up India’s crude steelmaking capacity to 300 MT by 2030. India’s construction sector will further stimulate demand for the steel industry with government-led initiatives such as “Smart Cities” and “Affordable Housing” underway as well as plans to build India’s industrial corridors.
Additionally, in December 2019, India’s Finance Minister unveiled a plan to invest USD 1.39 trillion in public infrastructure over the next five years. Lastly, in its draft framework policy “Development of Steel Clusters in India”, the Ministry of Steel envisioned a long-term opportunity of building integrated steel hubs to boost manufacturing in the country. These initiatives along with the recurrent focus on “Make in India”, spur hope and sustained growth for the Indian steel industry at large.
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Source:Sneha Saigal Business Development Executive at Saigal SeaTrade (https://www.saigalseatrade.com/)
