Page 23 - August-2020-Issue

ARTICLE

It is to be noted that India which India declined by 19.4 per cent growing at 76 percent in the last two
is importing nearly 6-7 million months of the current fiscal, steel exports for India contain a large per-
tonnes of engineering goods each centage of semi finished steel to take advantage of temporary shortage
year (an opportunity for Indian of this category in the global market. It must get converted to value
capital goods sector to replace added products in the coming months.
import by indigenous production Based on the assumptions that most of the lockdown ceases from June/
and helping steel consumption) July and there is no recurrence of the Killer virus, WSA has projected
has imported 27 per cent and 57.5 the countrywise steel demand shown in Table-3.
per cent less of imported capital
goods in March and April’ 20.
The total merchandise imports Table-3: Short range Outlook of steel consumption/
have gone down by 58.6 per cent demand: 2020-21 (in Million t)
in April’ 20, while total merchan- Country 2019 2020 2021 Growth Growth
dise exports have fallen by 60.3 consum- proje- proje- (%) in (%) in
per cent with a much lower level ption ction ction 2020/ 2019 2021/ 2020
of trade deficit due to steep fall in Germany 34.9 27.9 31.3 - 20.0 12.0
crude oil prices. The FE reserve at EU-28 158.1 133.1 147.0 - 15.8 10.4
$ 487 billion is comfortable to pay Turkey 26.0 26.8 29.3 3.0 9.3
for 1 year imports. Russia 43.5 39.1 41.7 - 10.0 6.5

USA 97.7 75.3 79.5 - 22.9 5.7
Current Scenario: China 907.5 916.5 916.5 1.0 -
Production, Consumption, Japan 63.2 51.1 54.6 - 19.1 6.8
Import and Exports of South Korea 53.2 46.5 49.2 - 12.7 5.9
Steel India 101.5 83.3 95.8 - 18.0 15.0
India produced 8.5 MT of crude Asia incld. Oceania 1253.3 1218.6 1243.2 - 2.8 2.0
steel in April-May’20 with public
sector (6 SAIL plants and RINL) World 1766.5 1653.9 1717.4 - 6.4 3.8
producing 23.5 per cent of this. Source: WSA
The pandemic crisis is primarily
demand centric and hence do- The above estimates are consid- consumer durable and packaging
mestic consumption during these ered a bit pessimistic as May ’20 industries are suffering for want
two months at 28.1 MT is hugely base scenario continues to be dis- of investment and consumption
lower compared to last year. Poor mal, but a near V-shaped growth expenditures, the pricing of steel
investment (public and private) in later port of H2 of 2020 may is moving within a band. Table 4
in infra/consumption demand spruce up the figures. shows the movement of prices of
could not pull up the demand major raw materials of steel fin-
of machinery and capital goods. Pricing ished steel items.
Lockdown, disruption in sup- Pricing of steel which is market The declining prices have an im-
ply chain, shortage of labour and determined has consequently fol- pact on the EBITDA of all steel
uncertainty in income and em- lowed a declining trend in tan- producers. The current scenario
ployment adversely affected the dem with lower demand and re- calls for innovative and short term
demand for automobile and con- stricted supply (shift of Demand marketing strategy, the export
sumer goods. It is also observed and Supply curve). As the pat- thrust is one of them. Capturing
that all the global steel players are tern of demand changes is almost the rural demand emanating
taking trade protective measures similar in all countries, with all from construction of houses,
to enable domestic demand to be the major steel using segments, sheds, other buildings through
met by the unutilised domestic construction and infra (Rail, the wide network of distributors
capacities and this poses a chal- Road, Ports, Imports, Oil & Gas) and rural dealers is another strat-
lenge to enhancing steel exports. real estate, mechanical and elec- egy that are providing reasonably
While finished steel imports by trical equipments, automobile, good dividend to the producers.

Kaleidoscope August, 2020 23