Icra said in its latest report that the performance of the domestic steelmakers is likely to be adversely impacted in Q1 of FY21 owing to the COVID-19 pandemic and the nationwide 21 days lockdown.
Domestic firms may face challenges due to weak domestic demand and this is likely to lead to inventory pile up which will exert pressure on the steel prices.
Although the reported cases for China have shown a decline in recent weeks, there is a spike in the number of cases globally and this will keep seaborne demand muted until the situation improves.
Icra does not expect to see a rebound in domestic steel consumption growth going ahead in FY21. Consumption growth is likely to settle at around 2-3 percent in FY2021as compared to a growth rate of 3.8 percent in FY2020, given that Q1 could be a very weak quarter.
Industry capacity utilization rates are seen to be lower from 81 percent in FY2020 to about 79 percent in FY2021due to tepid export market and incremental capacity addition of 10 mtpa next fiscal, assuming a recovery in demand conditions in the second half.
Currently, the seaborne hot-rolled coil (HRC) export price offers have declined in March 2020 for want of buyers. However, most large domestic steelmakers have continued production during the lockdown, given the high shutdown costs.
The domestic HRC prices which stood at Rs 38,000 per tonne in March 2020 is likely to see corrections in the next quarter, given the choking of demand amidst the lockdown.
