After being hit badly by the onset of COVID-19 pandemic, Indian steel production has begun to gather steam since the third quarter of the current fiscal.
Data from the World Steel Association (WSA) show that India’s steel production increased by almost one percent to 9.06 million tonnes in October compared with the same period a year ago.
India’s steel production was, however, a tenth of Chinese output that has been pegged at 92.2 million tonnes in October by WSA.
For the 10 months to October, the steel association data showed a sharp 14 percent drop in India output.
India’s crude steel production during January-October has been estimated at 79.68 against 93.03 during the same period last year.
Steel production in India was affected after COVID-19 pandemic set in during March with the Union Government announcing a shutdown, according to an expert in the iron and steel sector.
An industry expert said that the steel sector had recovered from an almost 90 percent fall in demand when Coronavirus broke out in late February-early March this year.
“Capitalisation was poor. It was less than 25 percent with the steel sector being badly affected in the first and second quarters of the current fiscal. We have seen revival only in the third quarter,” he said.
According to an executive with one of the leading steel companies, steel companies were also affected as the supply of iron ore, the main raw material for steel, became tight in view of the closure of small mines during the pandemic.
With rural parts of the country witnessing economic activities since June, things have begun looking up for key sectors such as automobiles, one of the major consumers of steel. Construction activities have also added to the uptrend.
In view of these, sentiments in the Indian market have improved leading to demand from the automotive sector, particularly after Diwali and Pooja, said the expert.
The executive said that demand for steel from the infrastructure sector was good, though it was “not very good” from the housing sector. With demand for automobiles rising as people were looking to use their own vehicles, offtake of steel by the sector was higher.
Automobile and construction sectors together make up 75 percent of steel demand in the country, according to the expert.
He said that the outlook for steel from the automotive sector, including spares, was likely to be good for the rest of the fiscal.
“The sector is now up and running with people running their plants to capacity. Demand is good, including from construction, as we see a revival in the economy,” the industry expert said.
But the industry executive said that demand from the housing sector was lacking as the middle class has been badly affected by the pandemic.
“Many have suffered a cut in their salary and they are not in a position to buy properties,” he said.
The pick-up in steel demand is seen sustaining and prices could rally further in the next three months, the executive said. Currently, steel prices have increased by 10-15 percent on strong demand.
Steel prices are being aided higher on the news that vaccines tested to tackle Coronavirus have reported at least 90 per cent efficacy, the expert said, adding that of late, resulting in “steel selling like onion”.
Prices of hot-rolled coils, a primary material for the industry, are currently ruling at Rs 42,000 a tonne, up by Rs 7,000 over the last six months. Last week, steel prices were raised by Rs 750-1,000 a tonne by the producers.
According to Trading Economics, steel prices (hot-rolled coils) have increased by 13 percent in the last one month and nine percent year-on-year. Currently, the commodity is quoted at 4,081 Chinese yuan (Rs 45,838) per tonne in the global market.
Rising steel prices have led to the engineering sector expressing concern. Experts feel that adding more production capacity could help the user industries from such huge price shocks.
The Indian steel industry is on an expansion mode. According to the Organization for Economic Cooperation and Development, India’s steelmaking capacity could touch 142 million tonnes by 2022.
Meanwhile, WSA data showed that China alone accounted for over half the production in October at 92.2 million tonnes, a rise of 12.7 percent over October 2019.
During October, Asia alone accounted for 120.11 million tonnes of crude steel production. The data accounted for steel production in 64 countries across the world that made up 99 percent of the output in 2019.
Among other nations, Japan made up 7.2 million tonnes, the US 6.1 million tonnes and Russia 6.05 million tonnes. Japan’s output was 11.7 percent lower, while that of the US by 15.3 percent. Russia’s production was 4.3 percent higher compared with October 2019.
For the January-October period, global crude steel production has been pegged at 1.51 billion tonnes, down two percent compared with the same period a year ago.
Of this, China alone accounted for 873.93 million tonnes and its production was at least 790 million tonnes higher than India.
(Subramani Ra Mancombu is a journalist based in Chennai, who writes on topics in commodities and agriculture)