Steelmakers have been making an impressive comeback of late. The stock price of major steel producers has been on a rally like no other. A meteoric rise in production, robust recovery in demand, and record-high selling prices have all pushed the incumbents in the industry on a profitable path.
The Indian steel market, which was hit by the COVID-19 pandemic and subsequent lockdowns, has started showing signs of recovery, The pandemic had severely disrupted the steel sector in the first quarter of the ongoing fiscal, particularly in April. However, there is a recovery visible in the market with a pick up in demand, As the process of unlocking started from June onwards in a phased manner, activities in construction and various projects have picked up and the demand in the domestic steel market has surged. Further with the ensuing festive season the demand for white goods and the auto-sector will also further spur the steel market.
Due to the bad market conditions developed post-outbreak of the virus, steelmakers were forced to cut down their operations by up to 50 percent in April. The players also had to turn to exports to find markets for their produce. However, with the relaxation in lockdown norms, the players started ramping up their production levels in a phased manner.
The Cabinet move to extend the Production Linked Incentives (PLI) scheme worth Rs 6,322 crore to the Indian steel sector will spur more investments and production in the specialty steel segment. The government has approved a financial outlay for the steel sector. The special steel product lines which will be covered under this scheme include coated steel, high strength steel, steel rail, alloy steel bars, and rods.
Union Minister Prakash Javadekar, while announcing the decision, said that the scheme will make Indian manufacturers globally competitive, attract investment, and enhance exports.
India was struggling with a crippling economic slowdown even before the pandemic made landfall. There was a slowdown in the automobile sector. There was a lull in the real estate industry. Infrastructure projects weren’t booming either. Tata Steel incurred a loss in the two quarters preceding the pandemic. And JSW Steel’s profits dipped by a whopping 90%.
But then in the initial months of the lockdown, While demand was collapsing back home, China emerged as the unlikely savior as the country began opening up and significantly ramping up investments in infrastructure. So, Indian steelmakers started exporting steel to the Red Dragon. In fact between April and September 2020, China alone accounted for 30% of India’s steel exports.
Then, as the lockdown eased back home, Indian steelmakers got another booster shot as the recovery in demand started gaining momentum.
So, clearly one can say that the steel industry has managed to cope with the losses and hit the market with its glooming rise.