India's demand for steel contracted by 91 percent year-on-year in April 2020 with end-user industries' like auto real estate and infrastructure that constitute 80 percent of demand, coming to a virtual standstill.
Domestic steel production fell by a record 69.5 percent year-on-year in April 2020 as per provisional figures. According to data released by the Joint Plan Committee (JPC), the country produced only 2.8 million tonnes of crude steel during the month.
Steel has been listed as an essential commodity and allowed to operate during the lock-down period. However, production was affected by a sharp fall in demand from the user industries, CARE Ratings said in its latest report.
Steel manufacturing was hit significantly in the months of March and April when the country was under lock-down when most user industries experienced a stop in production.
"Domestic steel industry had to scale down their production in the absence of demand from user industries. Only the top six integrated steel producers are expected to have reported production during the month. These steel companies are working at less than half of their capacities," the report said.
Secondary steel producers are unlikely to have reported any significant output as they grapple with additional problems of low working capital and depletion of cash reserves under lock-down, the report added.
The slump in demand from consumer industries such as construction, real estate, automobile, and infrastructure, which consume 80 percent of steel, has resulted in a dramatic decline in steel production.
Bringing back migrant workers who have returned to their home state and restoring the supply chain would be crucial challenges ahead as steel producers concentrate on rising production, the report added.