India’s domestic steel demand could drop by around 20% y-o-y in 2020 due to severe erosion of demand in the April-June quarter due to the disruption caused by the coronavirus pandemic.
Demand in April-June had fallen by around 18-19mn t which may be hard to recoup in 2020 or even in 2021. Domestic demand in 2022 may be similar to 2019 levels, Peeyush Gupta, vice-president (sales & marketing) of Tata Steel told SteelMint. “The pandemic has set back Indian steel demand by 1.5-2 years,” he said.
The quick recovery of rural markets has been a ray of hope for Indian steel producers, with fewer coronavirus cases in villages compared with large cities allowing for a swift restoration of economic activity.
Construction of rural houses, farm implement production and sales of other manufactured products has been good as farm incomes from the previous rabi harvest were decent, said Gupta, adding good monsoon rains also augured well for rural incomes and spending later in the year.
The construction sector, as a whole, has been the worst affected by the pandemic so far, especially due to migrant labourers returning to hometowns. Infrastructure, automobiles and infrastructure sectors, all major steel consumers, were affected to varying degrees, said Gupta.
Tata Steel banked on exports, like its peers, to push volumes in the previous quarter as domestic demand fell off the cliff. Around 50% of Tata Steel’s total output was sold overseas in April-June, with the proportion likely to fall to 30-35% in Jul-Sept as domestic demand recovers, said Gupta. But total export volumes may remain the same for Q1 and Q2 of FY’21 as the output will increase in this quarter. TATA Steel expects more exports of finished steel and sale of larger volumes to neighbouring countries in this quarter.
Most Indian integrated mills sold large volumes of steel to China, apart from some sales to Vietnam and Bangladesh in the Apr-June period.
The company is not seeking to rush into production at full capacity as it seeks to observe social distancing and other measures to control coronavirus spread at the workplace, but output at full capacity is likely to be achieved in this quarter, said Gupta.
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