Demand for domestic steel seems to be reviving in some way, with end users taking the first steps towards restarting operations, but a return to normalcy might still be a long way off.
In the past couple of days, a number of automakers, including Maruti Suzuki, Hero MotoCorp, Mercedes Benz India, Eicher Motors, TVS Motor, and Isuzu Motors India, have announced they have got clearance from the government to resume operations. Construction activities, too, have resumed, albeit in a staggered manner. In some pockets there is also demand for yellow goods. No doubt, between Lockdown 1.0 and 3.0, there has been an improvement in demand, but steel companies view this as too little.
Typically, construction accounts for 60-62 per cent of steel end-use and automobile 15-16 per cent. The demand that is coming back is mostly from auto components, fabricators and some government projects, say steel producers. But they point out that it's not just a restart of activity at end-user level that is required; the value chain, which has completely collapsed, needs to be reconstructed for a significant pick-up in demand.
ArcelorMittal Nippon Steel India (AM/NS) has restarted many of its production units, including COREX, Conarc, hot strip mill, compact strip mill to ramp up production. Production at blast furnace, too, has been ramped up in line with demand.
But a further increase in production is riddled with challenges. A spokesperson for AM/NS India cited normalising supply chain and production ramp-up at customer end as major challenges.
Officials at Steel Authority of India Ltd (SAIL) said things were starting to move. Customer meets were being held. But most of the demand currently was from government segments. "Availability of labour remains a challenge," said an official.
Jindal Steel & Power Ltd (JSPL) Managing Director V R Sharma pointed out that steel markets were still closed. "The MSMEs need to be allowed to function without permission."
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