Steel industry benefits from rise in exports to China: Ind-Ra

Mumbai: The domestic steel industry, which has been facing headwinds for the past couple of months due to dull domestic demand and the COVID-19 woes, has benefited from increase in exports to China, though at lower margins, according to a report by India Ratings.

Small and mid-sized steel players, especially those in the micro, small and medium enterprises (MSME) category, have been impacted more and are likely to face tight liquidity due to delays in the receipt of receivables and payment of fixed charges towards labour, electricity, among others, said the rating agency.

"The increase in Chinese imports benefited domestic steel players, especially the large steel players who were operational at lower utilisation levels during the lockdown and who compensated for the dull domestic demand by increasing steel exports (majorly to China) albeit at lower margins," the report said.

Domestic realisation per tonne of steel by raw material cost for both hot-rolled coil and rebar are expected to fall further in the second quarter of the financial year 2020-21 with a further fall in steel prices due to oversupply as the production is expected to gradually increase with the easing of lockdown restrictions along with no corresponding increase in steel demand.

oth hot-rolled coil and rebar prices were down 3 per cent and 4 per cent, month-on-month, respectively, in mid-June 2020.

In May 2020, steel prices temporarily rose although higher inventories were available with steel players, mainly due to logistical constraints and manpower availability issues, resulting in limited supply to end-use industries which gradually re-opened after relaxations in the lockdown.

India Ratings, however, noted that timely policy support from the government would help bolster the demand for the domestic steel sector.