Indian Steel Industry Post-COVID-19 Outbreak

 

Forecasting slow but steady recovery ahead with JSPL’s new project of manufacturing head hardened rails, the steel industry in India sees hope in recovering from the effects of Coronavirus. 

So many industries have fallen victim to the drastic effects of Coronavirus and haven’t yet escaped its clutches. The impact could last long due to the lockdown restrictions as well. 

However, the Steel industry has been doing better compared to the others. Because steel is an essential commodity and the Indian economy depends on it, some sectors in the steel industry were permitted to operate despite lockdown. This allowed them to transport materials to ports for export to other countries.

It’s going to get even better once the pandemic dies out, as the demand for the material and products is set to increase in the coming months. 

Steel price has risen by 10% (source: the tribune). Domestic steel prices have also gone up due to low demand in Q1 and Q2 of 2020. 

Steel prices in Bangalore are lower than Hyderabad but higher than Kolkata. Kaushalesh steels offer high-quality products at the best steel rate in Bangalore.

Production Affected Due to Labour Shortage:

Due to the lockdown of the entire nation, the majority of the labourers had to return home, resulting in a labour shortage. And since the railway transportation is not fully open for all, some are not able to get back to work. 

The added disastrous effects of recent floods in many parts of India has not made it any easier for them. Hence, due to the slow migration of labourers, the construction activity in some states is expected to remain subdued until October, which forecasts slow, but steady recovery of the Indian steel industry. 

Indian Steel Market already Showing Signs of Recovery:

The chairman of global steel giant ArcelorMittal Nippon Steel, Aditya Mittal said that the domestic market in India is showing signs of recovery post-COVID-19, hence the major plant in Hazira, Gujarat is operating at full capacity. To increase business, the focus will remain on helping the domestic market grow. 

Demand for Steel is Set to Increase:

In April and May, the steel industry was hit by weak demand and oversupply, causing the price to decline. Demand for building and other construction materials is set to increase. According to Anil Kumar Chaudhary, the chairman of SAIL, construction projects have resumed work in some states such as Telangana and have demanded steel and cement. 

Some automobile companies like Hyundai and Maruti have started the production process as well, so demand from auto sectors can be expected to rise. 

Until now, the demand has been fluctuating, affecting supply as building material suppliers were hit hard by the pandemic. It is predicted that the demand will shift to bulk orders. Demand for domestic steel from rural areas is on the rise.

However, compared to 2019, the demand for steel in India is likely to decline by 18% in 2020 (source - Financial Express). 

JSPL’s is the first Company in India to Start the Production of Head Hardened Rails:

The new production project undertaken by JSPL  (Jindal Steel and Power Limited) is likely to create a surge in demand from the metro and railway sectors. It has the potential to meet the requirements of the country and can help the Indian Steel industry continue to grow as one of the largest steel producers in the world. 

Metro rails were being imported from South Korea and other countries. Recently, JSPL has started to manufacture head hardened rails to Indian metro system. Offers are already coming from Kolkata and Pune metro. The company is in discussion with 18 other metros in the country which may need their newly produced rails. 

The Delhi metro is soon expected to replace the rails with new ones. JSPL can supply them. The company is also looking to supply the Indian railways for its bullet train projects. 

JSW steel is set to resume all operations as the lockdown has been lifted. The 4 blast furnaces and 2 corex plants present in Bellary, Karnataka is under preparations for re-opening. Operations in other locations are also set to recommence at full capacity.

The Joint Managing Director and CFO of JSW Steel has said that demand is rising from home goods, packaging and construction industries. The price too is likely to rise. JSW steel price in Bangalore at Kaushalesh Steels is quite competitive and reasonable. 

What is the future of the Steel Industry in India?

The growth of the steel industry in India is looking positive, with billions of dollars invested in major steel companies like JSW, SAIL, TATA, etc., to increase the steel production capacity in the country. The per capita consumption of steel is expected to rise in the next few years with increased infrastructure and flourishing railway sectors. The per capita steel consumption has increased from 57.6 Kgs to 74.1 Kgs in the last 5 years.

The government has undertaken many initiatives to boost the steel industry in India. To curb imports, “steel scrap recycling policy” has been introduced, and to ensure supply to domestic steel industries, a 30% export duty has been imposed on Iron ore. (Source: Media reports, IBEF)

Plans to Boost the Industry:

Notes: FY - Financial Year which starts in April and ends with March.

MTPA: Million Ton Per Annum.

References: All information is referred from media reports, Press releases, and IBEF. For any changes or removal of information, please feel free to let us know.

• For FY20, JSW Steels has intended to supply 1.5 lakh tonnes of TMT rebars to the Indian metro rail projects.
• JSW Steel has set a goal to increase their overall steel output capacity from 18mtpa to 23mtpa by 2020 with a $4.14 billion capital expenditure programme. By FY22, they plan to increase the crude steel capacity to 27 million tonnes. 
• In December 2019, ArcelorMittal acquired Essar Steel for INR 42,000 crores and also formed a joint venture with Nippon Steel Corporation. In March 2020, ArcelorMittal Nippon Steel acquired the Bhander power plant in Hazira, Gujarat, from Edelweiss asset reconstruction company.
• SAIL’s production capacity is expected to increase from 13mtpa to 50mtpa in 2025 with an investment of $24.88 billion. 
• Tata Steel’s Kalinganagar integrated plant’s capacity is set to increase from 3mtpa to 8mtpa. 

Why is the Steel Industry Important to the Indian Economy?

Some of the major industries in India that are important to maintaining its economic stability are Iron & Steel, Textiles, Cement, Sugar, Banking & Insurance. Being the second-largest producer of steel in the world, the Indian economy is very much dependent on the steel industry. India has a vision of a $5 trillion economy by 2025 and has invested around 100 lakh crores in infrastructure. The steel industry can realize that vision and make it come true. 

The per capita consumption is also set to increase and it must continue to grow in the coming years if the economy is to develop at a faster rate. Government initiatives to make better infrastructure for housing, roads, railways are the key factors in strengthening the country’s economy through the steel industry. 

As a leading distributor of steel products in Bangalore, Kaushalesh Steels offers a wide range of products for all types of construction.