Like their international counterparts, Indian steel companies are under immense stress because of production and demand disruption in the wake of the COVID-19 pandemic.
The Press Trust of India reported Tata Steel and Indian public sector Steel Authority of India Ltd (SAIL) have cut their output by about 50%.
Quoting unnamed sources, moneycontrol.com reported the two companies had been forced into the output reduction because of reduced market demand.
The Indian government-imposed lockdown has impacted logistics movement.
Together, SAIL and Tata Steel contribute about 20% of India’s total steel production. SAIL has five integrated steel plants in the provinces of Odisha, Jharkhand and Chhattisgarh, while Tata Steel has two plants in Odisha and Jharkhand.
Other Indian steel companies, too, find themselves in a similar predicament.
According to a report in the Hindu BusinessLine, while steel has been categorized as an essential commodity — thus allowing steel companies to continue production during the 21-day lockdown period — demand was very low. Even plant capacity utilization was much lower than usual. Whatever production was happening was just building up of inventory.
India’s total domestic steel production is about 100 million tons annually. As it is, India’s steel sector has been struggling for several years thanks to competition from cheap Chinese imports.
A recent report by CARE Ratings said the pandemic may halt the rally in domestic steel prices — already evident in international steel prices — that have sharply declined.
But, with the lockdown scheduled to end in a week’s time, some steel companies, like JSW Steel, are preparing to recommence operations in some locations. A report in Business Today said the company has scaled down operations as of March 25.
At present, JSW Steel has four blast furnaces and two Corex in the south and central part of India.
Steel is a major component of India’s gross domestic product, which is losing $8 billion per day during the lockdown.