Steel demand will not rebound until Q3 - Crisil

Nearly 60% of respondents said they expect demand to rebound from the third quarter, according to a survey of steel producers by credit ratings agency Crisil, as infrastructure and construction work picks up steam, migrant workers return to work, and government fiscal measures improve affordability. funds.

About 33% of respondents in India estimate steel capacity utilization in the current fiscal year at 50-60%, while another 33% (including key integrated steel producers) see it at 60-70%. Overall, respondents expect a 66-68% utilization rate, according to Crisil. The constraints caused by the pandemic play an important role, such as slowing demand, logistics difficulties and labor shortages, shortage of workers to load /unload and move goods will hinder the transportation of raw materials and finished products.

Despite the fact that ports and mining operations were operating during the blockage, 45% of steelmakers faced supply disruptions. The presence of iron ore was the most affected (indicated by 45% of respondents).

The Covid-19 pandemic has dealt a severe blow to the steel industry. When construction and production stopped and a return to normal became a distant proposition, the outlook for the industry deteriorated in line with the economy as a whole.

Steelmakers are focused on near-term liquidity and cash flow management to overcome an anticipated 60-65% contraction in demand in the first quarter of fiscal 2021, according to the study. The anticipated collapse in demand has prompted steelmakers to take a cautionary tale about capital spending, with over 75% of respondents planning to either postpone or postpone their plans altogether.

The outlook for the construction sector, which accounts for over 65% of India's steel demand, has deteriorated significantly since the onset of the pandemic. Survey responses show that most infrastructure projects will be delayed even after the lock is lifted. In other sectors, no significant support for construction substitution demand is expected, including capital goods, by weak industrial production and continued slowdown in the auto sector due to cautious discretionary spending