STEELING UP TO A NEW NORMAL

High costs, low demand to haunt steel makers

- Tamajit Pain & Sumit Moitra

The outbreak of Covid-19 in the Wuhan industrial belt of China and its spread thereafter to other parts of the world, besides leading to loss of lives, went on to wreak havoc on the global economy as well as steel industry, dampening demand, depressing prices, reducing output, leading to loss of profitability and an overall weakening of the entire economic framework.

World Steel Association data shows that global crude steel production for 64 countries reporting to the body was down by 1.4 percent to 443 million tons in the first three months of 2020 compared to the same period in 2019.

But China’s Purchasing Managers’ Index (PMI) for steel sector is gradually improving, recovering to 42.2 in March from 36.6 a month earlier, and then again rising to 45.9 percent in April.

This in a way hints at the possibility of the nation channelising its surplus material through exports and is also supported by the recent raising of export tax rebates on key items of finished steel by China.

Nonetheless, India’s import of total finished steel from China declined by 22 percent in during 2019-20.

Imports of total finished steel were valued at ₹44683 crore ($6304 million), while exports were valued at ₹36726 crore ($5181 million), indicating a wide trade deficit.

Global steel prices were all south-bound in March, impacted more by the Covid-19 effect that disrupted demand-supply balance severely. Domestic steel prices were impacted by local supply demand imbalance and influenced by global trends.

How global steel makers are coping