Introduction:
The calamitous effect of COVID-19 on the world can be witnessed not only by human casualties but also with the pandemonium it is wreaking on the global markets. Although the Indian government, amongst many others, has launched ‘Unlock 1.0’ nationwide, still the key industries in the economy (steel, construction, heavy manufacturing, etc.) have a lot of recovery to do. If you are a mild steel channel supplier in India or an MS channel manufacturer in India, read the full blog to get updated on the effect of country lockdown on the steel industry.
Impact of Country Lockdown on the Steel Industry:
Some of the hardest-hit industries during the coronavirus pandemic were –
- Airlines
- Service sector (IT, Education)
- Steel Industry
These ‘operation-heavy’ industries faced global/nationwide supply chain volatility, market disruptions and an uncertain future in terms of sale and operating profit.
Lockdown Measures And Slowdown In Steel Demand:
Did you know that according to a Crisil Research survey of senior management at steel companies and industry experts, more than a third of industry respondents anticipate demand for steel to contract by over 15% for the fiscal, with the free-fall arrested gradually? Nearly 60% of the respondents expect demand for steel to recover in the third quarter of FY’21.
(Source – Bloomberg Quint, Crisil Research)The lockdown period forced a downstream demand from sectors like building, construction, and machinery. In addition to that, the demand from the automotive and aerospace sectors which relies heavily on the steel industry has also ground to a halt. The need for an additional recovery time post-COVID pandemic has led the steel producers to cut their manufacturing estimates substantially in response.
Brief Market Dynamics Concerning Steel Industry:
Some of the key challenges faced by steel manufacturing units across India are:
- reduction in demand,
- migrant labor situation,
- availability timely logistics of raw materials and lastly,
- liquidity/ working capital availability
Apart from curbs on production from steel manufacturing units, the clampdown on its logistics too, was taking a toll on overall operations and eventually, operating profit. With rail operations still yet to come to normalcy, it is observed that over 80% of trucks aren’t also moving due to restrictions posed on inter-state transport services.
“The first half of FY 2021 is expected to be challenging for steelmakers. Many buyers could prefer to sit at the sidelines, given the uncertain demand environment and liquidity pangs of steel consumers, amid dwindling sales and fixed cost obligations.”
~ ICRA’s senior vice-president, Jayanta Roy
Foreseeing Steel’s Demand For FY21:
With respect to the unique situation brought on by the Novel Coronavirus, the problem of demand should be viewed through two perspectives:
The first one is the quarantine shock, and the second is a fall in demand as a result of the subsequent economic crash. According to McKinsey, a ‘delayed recovery scenario’ suggests that new cases of infection are expected to peak by the end of April and decline by June. This means that the quarantine measures can only be lifted completely in the second half of this calendar year. In response to this, rating agency ICRA revised its steel industry outlook to negative and estimated a fall in demand of 20% in FY21. (source)
Conclusion:
Many are expecting additional support from the government to aid the pandemic-hit industries. Recently an Industry body, Confederation of Indian Industry (CII). suggested the government some measures for reviving the Indian steel industry’s growth affected by COVID-19 pandemic. So, if you are in the steel manufacturing industry then it is recommended that you keep holding on and make contingent plans for your business and self, in case your ideal scenario is not achieved.
Shree Ji Steel Corporation is the leading manufacturer, supplier, trader, importer and exporter of steel and structural steel products in India. They are also the leading mild steel channel supplier in India and one of the best MS channel manufacturers in India. Their wide range of premium iron & steel and hardware goods are most well-known across the global market.
Visit www.shreejisteelcorp.com for more details.
