India's steel demand has recovered faster-than-expected after sinking in the first quarter of the fiscal year, as rural sector consumption has revived, according to the country's largest mill by market value.
In the three months through June, consumption slumped by more than half as economic activity ground to a halt after India placed one of the strictest lockdowns in the world to curb the coronavirus pandemic. According to JSW Steel Ltd, though demand in the second quarter is still down about 10 per cent from a year ago, it has more than doubled from the previous quarter.
“There is a dramatic improvement and things are looking far better than what we all anticipated,” said Seshagiri Rao, joint managing director at JSW Steel, in an interview. “The sectors in which we were not expecting a big recovery so quickly is the auto sector, which has really done well,” and sales in other segments such as appliances, solar and coated products have also been good, he said.
JSW Steel’s retail sales volumes jumped 117 per cent in the July to September period from the previous quarter earlier and also rose 13 per cent from a year earlier, with rural demand being an important driver for the growth, he said.
“Whatever policy measures that have been taken, either fiscal or monetary, they are all targeted toward the rural sector or tier 2 towns,” he said, adding that restocking and credit availability has improved in these areas.
Yet, with around 15 million tonnes of demand lost in the first half, full-year consumption would be 10 per cent lower than a year earlier, he added.
According to data in JSW Steel's quarterly earnings submissions, Indian mills more than doubled their exports to almost 11 million tonnes during the first six months of the fiscal year due to the steep decrease in demand.
However, exports have been moderating as local demand improves. JSW, which exported 2.7 million tons in April-September, or 80 per cent of its entire shipments in 2019-20, expects to end the current year with overseas sales of about 3.8 million tons, Rao said. Global flat product prices are still attractive for exports, he said.
While expansion plans have slowed and capital expenditure lowered because of the pandemic, JSW is still keeping an eye out for expanding it is business and cutting costs. The mill, which recently received approval to buy Asian Color Coated Ispat Ltd., has also submitted an expression of interest to buy Gontermann-Peipers India Ltd., which makes iron and steel base rolls, Rao said.
“I don’t see any other asset that is available other than the disinvestments that can happen from the government,” he said. The government’s disinvestment in NMDC Ltd.’s Nagarnar steel plant would interest JSW and “as and when it happens we would like to review and then take the call.”