ICRA: Steel Sector Poised to Face Massive Challenges

SEATTLE (Scrap Monster):  The ratings service firm ICRA warned of significant challenges to domestic steel sector in India.

The ICRA note says that the domestic steel producers in the country are likely to be hit badly during the first quarter of the current year, mainly due to market uncertainties on account of COVID-19 outbreak and the 21-days national lockdown announced by the government to contain the spread of the virus. The producers are witnessing drastic decline in domestic as well as export demand. This in turn may lead to huge inventory pile-up and subsequent price decline.

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The national lockdown has almost crippled the construction and infrastructure sectors, which are considered as the key demand drivers for steel demand growth in the country. Other sectors including automobile and capital goods are witnessing muted growth. In addition, the widespread outbreak of the virus in countries across the globe has impacted seaborne steel trade, ICRA noted.

The virus outbreak and the slowdown in Chinese steel demand may have near-term impacts on global steel demand-supply balance.

Further, ICRA note says that a rebound in steel consumption growth is unlikely to happen in 2020-’21. It foresees a lower consumption growth of 2-3%, as compared with 3.8% growth recorded during 2019-’20.