The Indian steel sector is bravely steeling up to the challenges that Corona is leaving in its deadly wake.
As construction activities came to a grinding halt and manufacturing units downed shutters, demand for steel plunged like never before and prices plummeted to historic lows. However steel makers could not shut down their blast furnaces, which could have been even more burdensome.
The result: the sector is left with bulging inventories, even as it is trying to spark domestic demand through lowering prices and other incentives, besides sharpening focus on exports. But how much more can the industry take now?
Chairman and Managing Director of RINL Mr P K Rath sums it up succinctly “The steel market was looking upwards in January this year and we had seen an uptick in prices too. But then came Covid-19 and steel prices started to fall from February. I would say that in March, steel prices plummeted and with the lockdown, (industrial and manufacturing) activities came to a grinding halt. April figures were dismal to say the least,” he told Vizag Industrial Scan.
RINL sold just about 20,000 tonnes in April in the domestic market. “In the month of May we saw some uptick as we did 150,000 tonnes in the domestic market” Mr Rath said.
“Auto and construction sectors are still languishing and till they rebound, steel demand is going to be subdued.60 per cent of its sales goes to the auto and construction sector, which will only come back after the migrant labour is back.”
Chairman & Managing Director, RINL
Echoing similar sentiments, Research agency Ind-Ra feels that the key challenges in the near term are manpower availability and ensuring finished inventory to normal levels. Although steel and its raw material commodities have been classified as essential goods, the logistical constraints may remain due to non-availability of fleet and longer trip time, the Ind-Ra report pointed out.
Since their January peaks, steel prices dropped by about $ 70-80 per tonne in the following four months. Overall, experts feel that the built-up inventory shall put pressure on steel prices and there could be an overall correction of Rs 3,000 per tonne in average realisations during 2020-21 on the Y-on-Y basis.
Agreed Mr Rath and said “In regard to steel prices, there is stiff competition from all steel players. Auto and construction sectors are still languishing and till they rebound, steel demand is going to be subdued.”
Exports come to RINL’s rescue
RINL sold just about 20,000 tonnes in the domestic market in April, while its exports during the same month were to the tune of 60,000 tonnes. Similarly in the month of May it did 125,000 in exports.
60 per cent of its sales goes to the auto and construction sector, which will only come back after the migrant labour is back.
The industry’s immediate weapon to ward off Corona has been their sharp focus on export markets that had not been so riled by the virus. Industry sources said deals for 200,000 tonnes of HRC were reported from India to Vietnam and China in the last few days of last month at prices between $ 390 and $ 405 per tonne.
However, steel makers have all registered a fall in their outputs, but this has not deterred them from setting ambitious targets for 2020-21.RINL has set an ambitious target of 5.5 million tonnes for 2020-21. To sum it up, the Indian steel sector has indeed fought the Corona surge bravely. And this year, it will be an even more aggressive battle to keep the virus away from its books.