Economic recovery, demand revival spark hopes for steel sector in 2021

New Delhi: Recovering economy, sprouting demand and improving prices raise hopes for the country's battered steel sector as it steps into the new year after pandemic-induced disruptions turned 2020 into a "disaster" for the industry.

As the sector experiences signs of better times, the apex body of domestic steel makers, ISA, expects good days ahead and surely no more outbreak like that of coronavirus infections.

The Indian steel industry grappled with tough times in running their operations as well as witnessed a sharp plunge in demand for steel soon after the coronavirus pandemic and subsequent lockdowns disrupted overall economic activities. Adverse market conditions forced steelmakers to cut down their operations by up to 50 per cent in April.

There was a shortage of manpower as many workers migrated to their native places amid the lockdown as well as limitations on the number of staff working at an office or site after gradual unlocking. The nationwide lockdown came into force in late March and the relaxations began in a phased manner only in June.

While terming 2020 as a "catastrophe" for the steel industry, Indian Steel Association (ISA) Deputy Secretary-General Arnab Hazra said there is a revival in demand now which will continue to grow in 2021. "We are expecting good days ahead and no more outbreak of any virus like corona in the future. Year 2020 was a disaster, we expect no more disaster. This will save us from further disruption," he said.

The outlook for the sector is turning positive and the industry expects the government will spend more on infrastructure in the new year, which will have a multiplier effect on demand, Hazra said, adding that the demand will show resilience to reach to pre-Covid level in 2021.

In 2019, the demand was around 100.2 million tonne (MT) and that will fall to 81 MT in 2020, he noted. Helped by government spending and demand coming from steel-intensive sectors, the overall steel demand is expected to reach 100 MT in 2021.

"Demand is clearly visible and going forward is expected to become stronger which augurs well for the industry in 2021," he said.

JSW Steel Joint Managing D Seshagiri Rao said, 2020 is the worst year in the last 70 years and that the unprecedented pandemic has had a devastating impact on the world economic growth. Even though the overall steel demand is expected to fall in 2020, the industry is experiencing improvement in realisation and margins, he added.

According to Rao, the company's expansion plans and inorganic growth through acquisitions are expected to come to fruition by the end of March 2021 coinciding with a rebound in economic activity.

JSW Steel's priority is to leverage the availability of additional capacities to meet the incremental demand that would arise due to economic rebound to create value to stakeholders, he said. State-owned SAIL's Chairman Anil Kumar Chaudhary said that from the third quarter of the ongoing fiscal, the market has started improving and will continue to do better in the next fiscal year.

The growth in the auto sector, infrastructure and construction, white goods and agri equipment will aid the steel demand in India, he said. Things are improving in the domestic and the international prices are on the rise.

Domestic prices are governed by the international prices whether they are of steel or iron ore, Chaudhary said.

"Looking at this, we think domestic demand will continue to be strong in the fourth quarter. Overall, this (financial) year should be good despite the pandemic in the first quarter and also the fact that we lost a lot of money in Q1. Q4 will also be good. "Financial year 2021-22 should also be a good year for the industry because the demand has already started picking up and this buoyancy will remain," he said. Electrosteel Steels Limited's CEO Pankaj Malhan said in the last few months since the lockdown was lifted, things have improved and steel demand has started increasing as economic and manufacturing activity is starting to gain pace.

He also said that construction activity is also getting back to pre-Covid levels slowly and that the industry is bullish on the price of steel for the next two quarters.

"Plus, we are expecting that the government will announce favourable proposals in the (upcoming) Union Budget which will help the steel industry in terms of arresting the increasing price and shortage of iron ore which is a primary raw material for the steel industry by not only capping its price but also by stopping exports at a time when the domestic industry is facing a shortage," he said.

Rashtriya Ispat Nigam Ltd (RINL) Chairman and Managing Director P K Rath said "the pace of recovery of the market and surge in demand of steel in the third quarter has raised the hope of closing the year on a better note.

Our priorities will be definitely commissioning and stabilising the forged wheel plant and ramping up the plant production to its rated capacity. JSPL Managing Director V R Sharma said the passing year was globally one of the most challenging years for the industry as well as mankind due to the Covid-19. Some steel companies scaled down production of their operations while some had to close their plants, he added.