Steel sector may miss peak order season, wants supply chain opened up fully

Around 80 per cent of micro, small and medium enterprises (MSME) of the steel sector is employed in this segment.
India's downstream steel industry is unable to operate in most parts of the country despite lockdown guidelines having been eased.

Currently, only integrated steel producers are able to function. They are continuous process units that cannot be shut down abruptly and have been exempted from the national lockdown that kicked into gear on March 25. 

The problem is especially acute in the tubes and pipes segment which constitutes 30 per cent of India's annual steel production. 

India's estimated crude steel production was 8.7 million tonnes (mt) in March 2020, down 13.9 per cent over March 2019, said the World Steel Association (WSA). 

Around 80 per cent of micro, small and medium enterprises (MSMEs) of the steel sector is employed in this segment.  

Despite the ongoing lockdown, there are increased enquiries for these products ahead of monsoon on account of restoration of projects across the country. It is important to bring this (MSME) category under essential services, V R Sharma, managing director at Jindal Steel & Power, told Business Standard.

According to the WSA, India's crude steel production for 2019 stood 111.2 mt, up 1.8 per cent from 2018. 

The Federation of Indian Chambers of Commerce and Industry also asked the Union government to bring the segment under the essential services category. The industry chamber wants the entire supply chain of the sector - from integrated steel producers, secondary steelmakers and pipes, tubes, re-rollers, fabricators, downstream and servicing units, to loha mandis - to be allowed to function. 

Since these secondary units are mostly located in remote areas, following social distancing norms and other lockdown-protocols can be adhered to, keeping the wheels of business turning, said Sushim Banerjee, director general, Institute for Steel Development & Growth.

Though most of the players in this segment are small, with their units located in far-flung areas, Jindal Pipes and Maharashtra Seamless are some of the large organised players in this segment. 

Traders and dealers have their stocks in loha mandis. Since these are not operational, it's tough for the end-user, said Sharma.

While there are several loha mandis scattered across the length and breadth of the country, Govindgarh in Punjab is the largest of them.

The Industry argues that loha mandis be allowed to function like anaj (grain) mandis that have started functioning, with social distancing and other protocols being maintained to contain the spread of coronavirus.

"There are enquiries but either we do not have the material, such as scrap, fuel, cranes, or the required migrant labour. Cost is an important factor. If cranes are made available at twice the rate, it's not economical to produce the material," R C Mehta, owner of Delhi-based Sarda Energy & Minerals, said. He is part of the secondary steel producers association.

The Covid-19 outbreak has impacted domestic steel consumption significantly, with all major projects grinding to a halt for an indefinite period. Usually, October-May is peak steel consumption season in India when construction activity is in full swing.

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