ICRA: International Prices Are Expected To Aid Indian Steelmakers Tide Over The Second Covid-19 Wave

With the gradual lifting of lockdowns, ease in mobility guidelines, and improving vaccination coverage provided by the Indian government, the ICRA is expecting the domestic demand in steel to gain momentum in June and the coming months in 2021.

Also, the supportive international prices are expected to help domestic steelmakers come out of the second Covid wave that has wreaked havoc on the industry. This trend is expected to help recover and result in a pick-up in capacity utilization levels.

‘The COVID-19 induced pandemic has hit worse the steel demand within the country due to the second wave, which resulted in a 22 percent drop in April 2021, and a further 1 percent drop that followed the trend in May 2021, the agency added.

On the bright side, the data stating the current year's demand and consumption look far better as compared to the former year. The reason could be the nationwide lockdown and stricter guidelines that were imposed during April-May 2020.

Though the domestic demand has not gained much momentum, buoyant international demand and steel prices have experienced a surge that has helped the domestic steelmakers in India to remain a net exporter of steel with 122% year-over-year growth in exports in April 2021.

Though the exports in April month were lower than March 2021, the export momentum continued with a 30% M-o-M growth recorded in May 2021.

With many auctioned merchant mines yet to ramp up to their early level of production in Odisha, the country is experiencing a shortage of iron ore which is a key raw material in the production of steel.

This has further aggravated the domestic iron-ore prices due to which exports have become remunerative for miners. Even the higher grades of iron-ore export attract a 30% duty.

ICRA expects the shortage to persist for the next 6-9 months, resulting in elevated prices for a greater part of FY2022.