A surge in demand from the auto and white goods sectors and moderate activity in government infrastructure projects are driving the recovery of large Indian private steel producers, with some even beating last year’s numbers. However, small steel producers had to cut production because of severe shortage of raw material and higher input costs.
India’s largest steel producer, operated at 100?pacity for the first time in August since the nationwide lockdown, Tata Steel’s managing director and chief executive T.V. Narendran had said.
JSW Steel, the second largest producer, saw 15% growth in flat steel products at 980,000 tonnes in August, while crude steel production rose 5% year-on-year, and 6% sequentially to 1.31 million tonnes. Jindal Steel and Power Ltd sold 625,000 tonnes of steel in the domestic market in August, growing 18% month-on-month and 37% from the year-ago period.
“According to our estimates, steel demand will fall 20-21% this calendar year compared to 2019," Arnab Hazra, deputy secretary general, Indian Steel Association, said in an interview. “Last year, domestic demand for finished steel was about 102.6 million tonnes (mt) and this year, it is expected to be at 81-82 mt. From January to June, we lost about 15.3 mt of demand. We expect that from July to December, demand will fall by another 5-6 mt compared to 2019," Hazra said.
Even as the overall steel demand is expected to fall, large integrated players who have captive iron ore mines, downstream facilities and easier access to export markets are increasing production. This indicates that medium- and small-scale producers are the ones impacted the most by the pandemic. “There is a severe scarcity of raw material in the open market and iron prices have shot up. Integrated steel producers are safe from the price rise," Ramana Kumar, secretary, Karnataka Iron and Steel Manufacturers Association, said in an interview. “Because of the scarcity, the rise in prices, a reduction in manpower and problems with liquidity, secondary steel producers have cut down their production," said Kumar.
Small steel producers depending on electric arc furnaces have been hit hard by shortage of oxygen supply, Kalyani Steel managing director R.K. Goyal, said. Large steel producers use blast furnaces. “Many states are now prioritizing oxygen supply for hospitals. So, steelmakers without a captive oxygen plant are going to be in severe distress," said Goyal.
There is a significant shift in demand patterns in July-August compared to April-June. Long steel products, used in construction, were expected to lead the recovery, but muted activity in private construction and real estate sectors due to the labour shortage and monsoon threw a spanner in the works. However, flat steel production stepped up to meet demand from consumer segments such as automotive and household appliances.
The trend is also borne out in data from the Society of Indian Automobile Manufacturers, which recorded a 50% year-on-year fall in wholesale dispatches of passenger vehicles to 105,617 units in June. However, numbers for August show that passenger vehicle wholesales grew 14.16% year-on-year to 2,15,916 units.