ICRA Revises Steel Sector Outlook to Negative

SEATTLE (Scrap Monster): ICRA Limited- the credit ratings agency has revised the outlook for Indian steel sector from stable to negative, on the back of anticipated 20% decline in domestic steel demand.

According to ICRA, the data for the months of March and April this year provides early indications of an unprecedented demand slowdown. The demand, which recorded 22% year-on-year contraction in March, witnessed 91% decline in April. In 2020-’21, the domestic steel demand in India is expected to drop by upwards of 20%. This will be the sharpest demand fall in history, ICRA noted. The initial half of the current financial year is expected to be extremely challenging, it added.

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Jayanta Roy, senior vice-president and group head (corporate sector ratings), ICRA, said that the uncertain demand situation, coupled with various headwinds makes it tough for the steel industry to reboot itself from hibernation. The possible deferment of infrastructure spending by the government could possibly limit the possibility of a sharp bounce back in steel demand, once lockdown restrictions are eased, he noted.

ICRA noted that steel demand from various sectors including construction and real estate sectors may take some time to return to pre-Covid-19 levels. The other notable challenges include non-availability of labourers and raw-material supply.