India’s steel sector faces challenges from coronavirus, Beijing’s export incentives

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Like in other countries, the outbreak of COVID- 19 and the subsequent lockdown threatens to disrupt India’s steel production.
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What’s more, there are reports coming in now that Indian steel companies will face even more competition from rivals in China in this state of crisis, adding to the woes of the former.

The Economic Times reported Beijing was hiking export incentives on the primary infrastructure alloy by a third to help cushion the impact of demand destruction at home and overseas.
The move by China to increase export rebates on cold-rolled steel, stainless steel strip and others from the present 10% to 13% for a large number of steel products may prompt some Indian steelmakers to seek higher border tariffs if imports, too, were to surge now.
The Indian Steel Association said the impact on pricing will now depend on the inventory pile-up in China.
One of India’s largest steelmakers, Tata Steel, had decided to shutter its downstream standalone units in the Maharashtra and Uttar Pradesh provinces, although its main plants at Jamshedpur, Kaliganagar and Angul remain operational for now, the Business Standard reported.
Tata Steel’s consolidated crude steel production capacity is at 19.6 million tons.
Curbs on manufacturing and the clampdown on logistics had started taking their toll on steel operations, according to media reports.
ArcelorMittal Nippon Steel India, too, admitted production was impacted because of COVID-19 issues, lower demand and curtailed logistics. Jindal Steel & Power plants were all currently operational but could be impacted if the situation continued for more than a week. JSPL is expecting to end 2020-2021 with production of around 8.5 million tons.
One of the biggest problems steel companies in India face is transportation. The recently imposed lockdown of 21 days means trucks can no longer transport steel cargo.
A request has gone out to the Indian government to allow movement of trucks for the industry.
On the other side, demand has also come down (from automobile makers, for example). The auto sector accounts for about 15% of steel usage, while construction and infrastructure around 60%.
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The coronavirus outbreak was likely to put pressure on domestic steel prices in the near term, as there are increased downside risks for the sector due to a drastic supply-demand imbalance causing an inventory pileup, according to two new reports released recently.
The COVID-19 outbreak was likely to adversely impact Indian steel prices, which have been witnessing an upward trend since November, ratings agency ICRANSE said, while India Ratings & Research (Ind-Ra) warned the global supply-demand imbalance will worsen as the virus spreads across the world.

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