How Coronavirus Outbreak and Lockdown Impact India’s Steel Industry?
21 April 2020
The Coronavirus (Covid-19) outbreak and a lockdown to prevent the spread are threatening to impact India’s production of steel products. Due to lockdown in China, supply chain has been affected, as India imports alloy for the production of steel. According to Export Genius, India is the second largest global producer of steel with an annual output of more than 106 million tonne, but lags much behind China that accounted for 928.3 million tonne of alloy in 2018.
Coronavirus Impact on India’s Steel Industry – Latest Developments
According to Union Minister Dharmendra Pradhan, the impact of coronavirus pandemic will be felt on global steel industry for at least two to three years, as China is the largest producer of the alloy.
Tata Steel is closing down its steel production units in Uttar Pradesh and Maharshtra due to lockdown and guidance from respective states. However, according to media reports main sites at Kaliganagar, Jamshedpur and Angul are operational as they are process plants and hence have permission from local authorities. Tata Steel is India’s largest steel makers and has potential to produce about 19.6 million tonnes of crude steel.
Apart from curbs on manufacturing units, the clampdown on logistics was taking a toll on operations. Covid-19 has resulted to lower demand of steel products and curtailed logistics. Around 80-85 per cent of trucks are not moving due to lockdown which is impacting dispatches.
At one end, steel companies in India were facing logistics issues, at the other, demand was lower as most of user industries were reeling from the impact of the lockdown. Many automakers had suspended production for indefinite time in the wake of the virus outbreak. Construction, too, had come to a standstill. According to India trade data, auto accounts for 15-16 per cent of steel usage while construction and infrastructure around 60%.
Why India’s steel industry affected due to China Lockdown?
Steel mills in India are gearing up for a rise in demand from overseas buyers as the covid-19 outbreak chokes supplies from China.
China is the world’s largest steelmaker and accounts for more than half of global output. The coronavirus has led to record high investors of steel in India, but production of steel products has affected, as migrant workers, who typically staff construction sites or drive trucks, are unable to return to work due to quarantine measures and movement restrictions.
Indian mills have been shipping out more steel this year as domestic demand remains sluggish amid the slowest economic expansion in more than six years. According to India export data, India’s exports of finished steel jumped 40% in the 10 months to January to 7.2 million tons.
India’s Biggest Export Markets of Steel
· United Arab Emirates
· Saudi Arabia
Companies would first try to maximize their sales in the domestic market if prices are better here and only then will they look for exports to ensure decent capacity utilization, according to industry exports. It is little unclear at present how long this window is going to be open for them as one doesn’t really know how long the coronavirus impact is going to stay.