Indian steel firms ready to take Covid-19 hit and cut production

Steel companies, including in the public sector, are considering cutting production in the wake of the coronavirus outbreak. JSW Steel of Sajjan Jindal has already announced its decision to cut production at its plants. Industry sources said senior executives at major players such as Tata Steel, JSPL, ArcelorMittal Nippon Steel India (AMNS India) and state-owned SAIL and RINL are also discussing similar actions.

In many states, the movement of raw materials needed to make steel is affected by restrictions across the country, they said. Industry employees face challenges in reaching their jobs.

Blast furnaces are large structures about 30 meters high in metallurgical plants. After the shutdown of the metallurgical company, it takes several months to restart the critical steel production equipment. During the blockage, railways and roads were also damaged. According to industry sources, the local government does not allow trucks carrying goods to ply the road.

The steel players have already informed the ministry of the problems they are facing and have called on the local administration to allow the movement of important raw materials and finished products.

Personnel on duty at important factories face difficulties in obtaining passes by the local administration. JSW Steel, Tata Steel, JSPL, AMNS India, SAIL and RINL together produce about 45-50 percent of the country's total steel output annually.

Tata Steel is closing its autonomous divisions in Maharashtra and Uttar Pradesh as directed by the respective states. The main facilities in Jamshedpur, Kaliganagar and Angula, however, are operational as they are processing plants and therefore have permission from local authorities, the sources said.

One of the largest steel producers in India, Tata Steel has a total production capacity of 19.6 million tonnes of steel with facilities in Jamshedpur in Jharkhand, Kalinganagar and Denkanal in Odisha, Sahibabad in Uttar Pradesh and Khopoli in Maharashtra.

On the one hand, metallurgical companies faced logistics problems, on the other hand, demand was lower as most of the user industries were shocked by the lockdown. Many automakers have suspended production indefinitely following the virus outbreak. Construction has also stalled, an industry source said.

Automobiles account for 15-16% of steel consumption, while construction and infrastructure account for about 60%.