Steel firms mull output cut amid subdued demand


Photo courtesy: Tata Steel Europe

The spread of coronavirus, coupled with rising threats of cheap imports from China, Japan and South Korea, has kept the lid on domestic steel prices and forced steel producers to consider pruning production in the short term, amid subdued demand.

In a recent report, Kotak Securities has projected a price cut of Rs 1,000-1,500 per tonne in the domestic market in the first quarter of FY21. Indian steelmakers, who have hiked prices by 15 per cent for hot-rolled coils (HRC) since November last year to Rs 37,000 per tonne now, will be forced to absorb costs until demand recovers.

“Steel consumption grew by just 3.8 per cent till February. Nobody knows what the future holds; but if the coronavirus spreads further across the country impacting manufacturing, steel industry will be highly impacted. Manufacturers fear huge pressure on prices and may have to go for production cut.

Paul Bartholomew, senior managing editor at S&P Global Platts, told a television channel on Tuesday that elevated Chinese steel inventory would weigh on global prices.

Already, Chinese steel prices have corrected by 6-10 per cent in the past two months as demand dropped. Its inventory has swelled to a record level of 25 million tonne, up 34 per cent year-on-year. Export prices of Japan have also corrected by 6 per cent to $475/tonne.

Although domestic steel prices are still trading at discounts of 7 per cent and 3 per cent to the landed costs of the metal from China and Japan, respectively, the situation may change swiftly, given the rising inventory in China. Rising number of confirmed cases of coronavirus in India and persisting macroeconomic concerns may dent domestic steel consumption, according to an ICRA report.

“Higher exports from China would keep regional steel prices under pressure; however, we don’t see China flooding regional markets given limited port infrastructure and ongoing early maintenance shutdowns. Export prices from FTA countries (Japan and Korea) have corrected by 6 per cent to $475/tonne and should create downward pressure in domestic markets,” the Kotak report said.

To beat costs, domestic steelmakers started raising the price from November onwards, anticipating a spike in government spending towards infrastructure. India Ratings and Research (Ind-Ra) also recently revised its outlook on the steel sector to negative for 2020-21 from stable.

Shekhar Ghosh is consulting editor, He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at

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