A surge in demand from the auto and white goods sectors followed by some activity in government infrastructure projects are driving the recovery of large Indian private steel producers. However, small steel producers have had to cut production because of severe shortage of raw material and higher input costs.
India’s largest private sector steel producer, Tata Steel, operated at 100 per cent capacity for the first time in August since the nationwide lockdown, Tata Steel revealed in a statement recently. JSW Steel, the second largest producer, saw 15 per cent growth in flat steel products at 980,000 tonnes in August, while crude steel production rose 5 per cent year-on-year, and 6 per cent sequentially to 1.31 million tonnes. Jindal Steel and Power Ltd sold 625,000 tonnes of steel in the domestic market in August, growing 18 per cent month-on-month and 37 per cent from the year-ago period.
Even as the overall steel demand is expected to fall, large integrated players who have captive iron ore mines, downstream facilities and easier access to export markets are increasing production. This indicates that medium- and small-scale producers are the ones impacted the most by the pandemic.
Iron ore prices have shot up. Ramana Kumar, secretary, Karnataka Iron and Steel Manufacturers Association, recently said, “Because of the scarcity, the rise in prices, a reduction in manpower and problems with liquidity, secondary steel producers have cut down their production.”
Small steel producers depending on electric arc furnaces have been hit hard by shortage of oxygen supply, which is being diverted to hospitals to fight the Covid-19 pandemic. Steelmakers without a captive oxygen plant are in severe distress.
Long steel products, used in construction, and real estate sectors are less in demand due to the labour shortage and monsoon. However, flat steel production stepped up to meet demand from consumer segments such as automotive and household appliances.
Data from the Society of Indian Automobile Manufacturers recorded a 50 per cent year-on-year fall in wholesale dispatches of passenger vehicles to 105,617 units in June. However, numbers for August show that passenger vehicle wholesales grew 14.16 per cent year-on-year to 2,15,916 units.