While steel production and allied activities such as mining are covered under the Essential Commodities Act, it has to be seen how long steel companies can continue producing with the demand being completely wiped out.
April 13, 2020
According to the media reports, the outbreak and spread of the COVID-19 pandemic is expected impact the steel industry. However, most of the steel companies have displayed a steely resolve and continue to maintain production braving the novel Coronavirus which had singed businesses across the globe.
Stopping production and shutting down the blast furnace will be a costly affair for the over-leveraged steel companies. Most large steel companies such as JSW Steel, Tata Steel, ArcelorMittal, Nippon Steel and SAIL are maintaining their production while many non-ferrous companies such as Hindustan Zinc, Hindalco Industries, and Vedanta Aluminium have either cut or discontinued production completely.
As per the leading daily, the sudden fall in demand will also put brakes on a steady rise in steel prices. Despite the slowing demand, steel companies were increasing prices to bridge the gap with the high global selling price.
While steel companies are receiving key raw materials such as iron ore, coking coal and limestone through rakes, they are still dependent on road movement for a variety of other minor raw materials such as ferro-alloys. All major steel plants have to reduce operations significantly over the next 7-10 days and keep only critical operations in a standby mode to ramp up production with minimum cost as soon as the Government removes the nation-wide lockdown.
On the contrary, steel production in China has already started and it is offering special incentives on exports even as other countries are busy fighting the pandemic with economic lockdown.
Coming out of Covid-19 crisis, the Indian steel companies not only have to cope with lower infrastructure spending by the cash-strapped government but also take on market under-cutting by China in the export market.
