COVID-19 impacts the Indian steel market=>
The COVID-19 has badly impacts operations globally as well as the Indian steel industry is a well-known fact. Moreover, the new normal that will emerge is likely to witness a realignment of power centers in different domains. The coronavirus crisis has impacted almost all supply chains dependent on China, which includes the steel sector.
Steel manufacturers in India are saying that buyers across the globe are choosing not to be dependent on any one country for their purchases. Take for instance the steel industry. Prices in China, which produces over half the world’s steel, have slumped like never before because the epidemic spread from China’s Wuhan.
Opportunity for Indian Steel Market=>
The unfortunate situation could be a blessing in disguise for the Indian steel industry further because all the Chinese ports are blocked. Indian steel industrialists could use this as an opportunity to scale up their exports to Southeast Asian countries which solely depends on supplies from China.
According to the director of Tufcon steel, they will focus on exports till demand-side improves and they had exported 75% of steel production during the pandemic. Clearly exports had become the focus, as there was virtually no domestic demand.
Tufcon Steel
Recovering the Indian steel market =>
But the good news is from May 2020 Domestic demand is slowly coming back.
In contrast, CRISIL, an S&P Global company, has in its baseline scenario forecast that steel demand contracts 14%-17% over April-March, while its pessimistic scenario was for a 22-25% demand contraction.
In this critical situation Indian Government should handhold either by monetary measures or fiscal measures to support the steel industries because the recovery will take a much longer time in India.
The industry needs to relook at its entire financial and risk management models, do rationalization of manpower and undertake other measures to become cost-effective.
Strong need Indian Steel hub =>
This unprecedented COVID-19 situation can be taken as a lesson for the Indian steel market. Establishing the ‘steel hubs’ has become the need of this hour. Indian mills see a long-term opportunity in establishing manufacturing in the country as well as steel hubs, as suggested in the draft framework policy “Development of Steel Clusters in India” published in October by the ministry of steel.India should give up the dependency on other countries by creating a serious alternative for doing business.
While Indian mills are unlikely to invest in such initiatives in the short term. Such investment zones would probably lead to inward FDI over the longer term.
The policy proposes the creation of ‘Integrated Steel Hubs‘ based on the principle of availability of raw material, logistics support, and/or proximity to demand centers in line with Gwangyang Bay in South Korea, Guangdong Province in China and the Ruhr region in Germany. This steel hub could be economic prudence for India.
