Steel traders, re-rollers face weak domestic demand: CRISIL SME Tracker

Large integrated steel manufacturers are unscathed, as a surge in exports cushioned the fall in domestic volumes.
Small and medium enterprise (SME) downstream steel players (re-rollers and traders) are struggling with weak domestic demand and falling imports amid the pandemic, even as large integrated steel manufacturers are firmly on the recovery path.

 

Re-rollers had got a huge fillip from the anti-dumping duty introduced in 2016 — large players saw margins improve and even SMEs saw growing volumes and better prices. But then the auto slowdown started. While traders kept afloat by diversifying, flat re-rollers could not cope. The pandemic added to the pain.

 

In comparison, large integrated steel manufacturers are unscathed, as a surge in exports cushioned the fall in domestic volumes. Indeed, revenue saw a sharp rebound in the second quarter after a steep fall in the first. Given the continuous-process nature of the industry, production had continued for most primary producers through the long lockdown.

 

Secondary players and traders, however, continue to suffer despite the gradual opening up of the economy, as supply chains have been impacted significantly.

 

A moderate demand revival is expected in the second half of this fiscal, led by improving auto sales and pick-up in construction activity. This is likely to limit the volume decline for SMEs, which saw revenue more than halve in the first quarter. But massive trade losses in the first half will ensure steep a revenue decline for MSMEs this fiscal year.



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