Steel Output in India Tumbles as Lockdown Slashes Demand
Crude steel production declined 70% from a year while consumption plunged 91%.
(Bloomberg) -- Steel output and demand in India, the world’s second-biggest producer, slumped last month after a nationwide lockdown to control the coronavirus pandemic brought the country to a standstill.
Crude steel production declined 70% from a year earlier to 2.75 million tons, while consumption plunged 91% to 700,000 tons, the nation’s steel ministry said in a statement. The reduction in output was more pronounced at private mills and their share declined to 62% from 82% a year ago, it said.
“Production in various steel plants suffered badly during the lockdown as demand crashed and movement stopped,” it said. Demand from sectors including construction and automobiles and consumer durables declined during the month, leading to a 4.7% month-on-month increase in stockpiles of finished steel to 13.85 million tons at the end of April, the steel ministry said.
Coronavirus-related curbs in production and the movement of people have halted activity across industries, drying up purchases from key sectors. Production is expected to fall in the year that started April due to lower sales and higher inventories, according to Care Ratings Ltd.
“We expect steel demand for FY21 to be significantly lower with June and September quarters to be badly impacted due to lower demand from the infrastructure and construction segments,” analysts Madan Sabnavis and Rashmi Rawat said in a report. Even after the lockdown is eased, the construction sector may not witness a surge in activity as a shortage of labor and restoring the supply chain will be the key challenges, they said.
Producers will continue to manufacture some steel as it is costly and time consuming to shut down and restart blast furnaces. That’s expected to lead to a substantial increase in inventories, Care said. “Mills will try to liquidate the existing stocks once demand resumes before starting to ramp up production,” it said.
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