India’s primary steel mills expect a strong revival in steel demand fueled by government-funded infra projects aimed at supporting economic recovery post the COVID-19 lockdown. Steelmakers have urged the government to priorities and speed-up projects that are in the pipe-line to spur demand.
Steel demand will increase once the lockdown is lifted as activities in various sectors like manufacturing, construction and infra sectors pick up significantly pace, according to Steel Authority of India Limited (Sail) Chairman Anil Kumar Chaudhary as per local media report. Sail plans to scale up steel production at all plants after the situation normalises.
Sail’s crude steel production and sales were at 16.15mn mt and 14.5mn mt, respectively in FY2020. The company’s exports surged by 54pc to 1.18mn mt from a year ago.
Mills in India are operating at around 50pc since the start of a nation-wide lockdown on March 25, which was extended till May 3. Most mills plan to return to 75pc capacity and align capacity to end-consumer demand.
Fall in domestic steel demand is temporary and will pick up once the government kick-starts various infrastructure projects, said VR Sharma, Managing Director of Jindal Steel and Power (JSPL) in an online seminar organised by All India Induction Furnaces Association (AIIFA) on April 26. He stressed that around 460 government projects are in the pipeline and could be initiated by December to stimulate economic growth. Ambitious projects road-linking project Bharatmala and waterways project Sagarmala could be kick-off earlier than scheduled. JSPL expects orders from Indian Railways and from others state-owned infrastructure and power transmission companies.
Sharma stressed on healthy demand for Indian steel from overseas markets including the Philippines, Indonesia, Malaysia, China, Italy, Spain and Germany.
On the other hand, secondary steel producers are quite wary of the post lockdown situation given the slump in demand and the production cuts taken by downstream auto and other manufacturing companies. Secondary steel producers foresee severe challenges in the near term. AIIFA has urged the government to provide stimulus packages, power tariff cuts and tax incentives to support small and medium producers tide over the COVID-19 crisis. Beside weak demand, steel producers are also wary about labour shortage, cash crunch and disruptions in raw material and finished good transportation.