RESTARTING STEEL Pricing power signals recovery

After the first quarter of disrupted supply chains, sharp drop in demand, uncertainties in logistics and also liquidity constraints, Indian steel industry has regained pricing power.

- Sumit Maitra

Since the beginning of the lockdown and since the start of the current fiscal, Indian steel industry operated at a tad lower than half of its capacity during the quarter, churned out 41 percent less output compared to the previous quarter.

Between April-June, demand fell by 55 percent while production dropped by around 45 percent. Even then there is surplus production in India.

And without any domestic market for their output, Indian steel makers were forced to look elsewhere, for exports, mainly China and also several other non-traditional markets to sell their output.

Out of 5.5 million tons of steel exported from India during the first quarter of FY21, 41 percent were semi-finished most of which reached China.

China’s insatiable demand for construction and infrastructure is even using up India’s semis creating opportunities for continued exports.

India’s internal demand is also rising now considering the steel inventory situation which has come down from beginning of April to end of June.

Rising steel prices

Most of the time exports don’t happen at very attractive prices.

But the domestic market for steel, it now appears, is now getting back its mojo by raising prices, twice during July and over the first week of August, cumulatively by around 2,500 a ton across product variants on the back of rising demand from construction, infrastructure and Railways which has raised the hope for a turnaround of the steel sector.

Indian steel industry : Q1 FY21 major highlights