THE COVID-19 EFFECT ON STEEL EXPORTS
Steel exports touched a record high in FY21, saving the day for companies, as domestic consumption dragged due to Covid-related disruptions in the first half of the year.
China’s recent move to withdraw export rebates of 13% on 146 steel products, along with rising international steel prices is likely to benefit Indian steelmakers to export more in the coming quarters.
The intensity with which the recovery happened has surprised everyone. Demand was led by automotive, appliances, and followed by renewable energy. Infrastructure and construction, Roads and highways & yellow goods.
A CRISIL report stated that while exports of finished steel in the first quarter of fiscal 2021 were driven by lacklustre domestic demand, the surge in the last quarter was led by higher export realisation. CRISIL expects the momentum to continue and push finished steel exports another 12-16 per cent higher this fiscal.
However, the dampener for the industry could again be the rising Covid cases.
The traditional demand driving sector for steel continues to be construction, which with the help of real estate construction and infra stimulus that have been announced by almost all the countries to prop up their economies immediately after the pandemic, would play a stellar role in strengthening steel demand. The demand for logistic-related facilities to support e-commerce, along with green recovery programmes and infra renewals, would play their part.
The automobile sector accounts for a much larger share in steel consumption in the US, the EU, Japan and South Korea (22-25% against 9% in India), is poised for a growth after sliding down for the last three years. The pandemic has brought about a thrust on owning personal vehicles as opposed to public transport. Similarly, in India too, passenger cars, light and medium commercial vehicles and tractors are selling in good numbers & reflect a rising rural income and demand.
Domestic Demand – driving forces
A number of mega government schemes in India like Jal Jiban Mission, PMAY-G & U, Bharatmala and Sagarmala provide good prospect for public investment, while projects like the dedicated freight corridor, Metro railways, Ujala, Port modernisation, new airports, renewable energy and irrigation projects would demand massive volume of steel that can be mostly supplied indigenously.
The Indian steel industry needs to enhance intensity in each of these segments by making available standard designs in steel that can be immediately implemented. The penchant for Atmanirbhar Bharat and Renewable energy would lead to higher demand for indigenous manufacturing of steel contained engineering goods by replacing imports.
Steel exports by India reached a record level of 17.4 MT in FY21 (including 6.6 MT of semis) which exceeds last year’s level by as high as 55.5%. Vietnam has received maximum Indian steel exports, followed by China (semis export), Italy, the UAE and Nepal. India has become a net exporter by a big margin as total steel imports at 5.04 MT is 29.6% lower compared to last year.
Steel to the rescue
Due to a spike in COVID-19 cases, local steelmakers were asked by the government to increase their production of liquid medical oxygen to meet a shortfall of the gas at hospitals. Steel manufacturers have increased their supply of liquid medical oxygen to more than 3,000 mt/day recently from an average of between 1,500 mt/day and 1,700 mt/day to help out local hospitals & the government bodies.
Fortran Steel, too, had scaled down production & diverted oxygen where necessary.
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