Moody’s Investors Service forecast a 10% decline in Indian steel consumption for fiscal year 2021, the Economic Times reported.
Nonetheless, Indian steel companies are upbeat, with some chief executives seeing the first green shoots of recovery. (For additional news and analysis of trends in steel and other metals markets, sign up for MetalMiner’s Gunpowder e-newsletter.)
The Moody’s report said new capacity additions in India will take a back seat because of a weak consumption pattern. The agency noted consolidation in the Indian steel sector would continue in 2020.
For the entire Asia Pacific region, Moody’s forecast a negative outlook for the steel industry.
Moody’s estimates of a 10 % fall in the coming 12 months was based on lower GDP growth that will translate into a drop in steel consumption. This drop, it said, would be because of plummeting automaker demand, and weakness in construction, infrastructure and shipbuilding.
In different interviews in the Indian media, steel CEOs agreed with the fact that consumption across the automotive and construction sectors had dropped.
Signs of recovery for Indian steel
But many saw the steel market showing the first signs of recovery despite numerous pandemic-related lockdowns.
In an interview with the Business Standard, ArcelorMittal Nippon Steel India Chairman Aditya Mittal said operations at ArcelorMittal Nippon Steel India’s (formerly Essar Steel) Hazira plant in Gujarat were running at full capacity.
Accepting that the COVID-19 pandemic had disrupted domestic demand, he said he saw the first signs of a recovery in the market.
In December 2019, ArcelorMittal had announced the acquisition of debt-laden Essar Steel and formed a joint venture with Japan-based Nippon Steel.
In another interview with the Financial Express, Dilip Oommen, AM/NS India CEO and president of the Indian Steel Association (ISA), spoke of his views on the potential growth of India’s steel industry.
India’s steel exports more than tripled in just three months. Exports stood at 1.55 million metric tons in June, mainly due to higher volume to China.
As such, Oommen said the Indian steel industry had to be more competitive and enhance the overall export ratio.
Leveling the playing field in India’s steel sector
The Indian government could also play a role by creating a level-playing field in the sector.
According to Moody’s, Indian steelmakers would divert their surpluses to relatively open export destinations following the decline in domestic consumption.
Another key player, JSW Steel, also saw an opportunity, as a market shift took place in the Indian steel sector, with other steelmakers not being able to ramp up output, the New Indian Express reported.
Seshagiri Rao, joint managing director and group CFO of JSW Steel, said that demand is recovering month after month.
Pointing to another metric in steel production, he said first-quarter crude steel production fell by 43%. Furthermore, six major players delivered 74% of that production.