Steel firms bear the brunt of Covid-19 impact, to scale down production

Steel companies, including those under public sector, are considering to scale down production amid coronavirus outbreak, according to sources. Sajjan Jindal's JSW Steel has already announced its decision to cut production at its plants. The industry sources said top management of major players like Tata Steel, JSPL, ArcelorMittal Nippon Steel India (AMNS India) and state-owned SAIL and RINL are also discussing similar move.

In many states, movement of raw material needed for Steel making is being impacted due to nationwide lockdown, they added. Employees in the industry are facing difficulties in reaching their offices.

"There is no purpose of just producing and building up inventory levels. Till when the players will produce and keep on piling the output. They can't stop the blast furnaces which are supposed to function continuously, but reduce production,"a source said.

Blast furnace is a large structure of about 30 metre high at steel plants. It is lined with refractory firebricks that can withstand temperatures to as high as 2,000 celcius.

Once stopped, it takes several months for a steel company to re-start the critical steel making equipment. During the lockdown, dispatch by railways and roads is also affected. According to industry sources, local administration is not allowing trucks carrying goods to ply on road.

Steel players have already apprised the ministry about the issues being faced by them and urged to ask local administration to allow movement of important raw material and finished goods.

Those on duty at important plant locations are facing difficulties in getting their passes made by the local administration. JSW Steel, Tata Steel, JSPL, AMNS India, SAIL and RINL together produce about 45-50 per cent of the country's total steel production annually.

At present, India's total installed crude capacity is at about 140 million tonne per annum.

Tata Steel is closing down its downstream standalone units in Maharashtra and Uttar Pradesh in line with guidance from respective states. The main sites at Jamshedpur, Kaliganagar and Angul, however, are operational, as they are process plants and hence have permission from local authorities, said sources.

One of India’s largest steel makers, Tata Steel’s consolidated crude steel production capacity is at 19.6 million tonnes, with manufacturing facilities in Jamshedpur in Jharkhand, Kalinganagar and Dhenkanal in Odisha, Sahibabad in Uttar Pradesh and Khopoli in Maharashtra.

At one end, steel companies were facing logistics issues, at the other, demand was lower as most of the user industries were reeling from the impact of the lockdown. Many automakers had suspended production indefinitely in the wake of the virus outbreak. Construction, too, had come to a standstill, said an industry source.
 

Auto accounts for 15-16 per cent of steel usage while construction and infrastructure around 60 per cent.