The World Steel Association of Brussels has released its Short Range Outlook (SRO) for 2020 and 2021, which predicts that steel demand will fall by 6.4 percent to 1,654 million metric tons due to the COVID 19 pandemic. Steel demand is expected to rise to 1,717 million metric tons by 2021, an increase of 3.8 percent compared to 2020.
China’s Early Recovery and Steel Demand
China's economic recovery began in late February, World Steel says, with the exception of the hospitality and tourism sectors, whose economy is rapidly approaching normalization. The deep freeze on economic activity in February led to a decline of 6.8 percent in GDP and 16.1 percent in fixed asset investment in the first quarter. Industrial output fell 8.4 percent, with the automotive sector showing the worst decline in 44.6 percent in the first quarter. By the end of April, all major sectors using steel had returned to full productivity, although the full functioning of the manufacturing sector was hampered by a slump in export demand, World Steel said. Following the removal of the lockdown on Wuhan on April 8, the construction sector has reached full productivity.
Indian Steel Demand
In the case of India, weekly demand and recession in infrastructure projects can be seen. Steel companies are finding it difficult to resume production due to logistics issues and increasing COVID-19 cases near factories. Tata Steel's production fell 34 per cent to 2.99 million tonnes in the June quarter. JSW Steel crude production fell by 2.96 metric (4.24 metrid). The steel consumption in Q1 reached 10.7 metric tons, which is 13% higher than the May 20 consumption in June ’20, indicating that the industry is in a partial revival mode. Although total imports were down by 1.26MT compared to last year, total steel exports stood at 5.54MT, indicating a significant improvement over last year.
The Indian government is said to have advised all states to refrain from signing any agreements with East Asian companies. Following these instructions, the western state of Maharashtra has suspended three agreements worth over Rs 5,000 crore signed with Chinese companies at a recent investor meeting. Canceling tenders already awarded to Chinese investors will be a difficult task, ”said Kazim Rizvi, founding director of the policy think tank. Projects funded by international organizations such as the World Bank or implemented through multilateral procurement guidelines do not explicitly allow any discrimination between countries.
India China Investments
Chinese investment also plays an important role in infrastructure-related industries, including construction equipment and steel mills. Almost half of the tunnel boring machines used to build an underground metro line in Mumbai, India's financial hub, are owned by Chinese companies, while the rest is owned by Western countries but made in China. "The sources of this type of equipment cannot be changed overnight," a former senior official of the Mumbai Metropolitan Regional Development Authority told the Indian Express. "Until Indian companies like Bell [Bharat Heavy Electricals] or BML start producing these big machines, we will have to rely on Chinese equipment."
Upcoming Hope on Vehicle Industry
On the other hand, some positive growth can be seen in the sales of two-wheelers and tractors and small commercial vehicles in rural and semi-urban areas. This is an excellent sign for the growth of agriculture. However, based on the update by the Society of Indian Automobile Manufacturers, it will take 3-4 years for India’s auto sales to return to peak levels
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