Steel sector needs govt's handholding to recover from COVID-19 disruptions: Seshagiri Rao

The domestic steel sector will take a longer time to recover from COVID-19 disruptions and will need government's handholding to emerge from this crisis situation, a top industry executive said.

The COVID-19 outbreak in India followed by the lockdown has impacted the steel industry severely. It has created demand destruction, affected the output of steel players as well as the supply chain, Seshagiri Rao, Joint Managing Director and Group CFO of JSW Steel said.

"Government handholding is required either by monetary measures or fiscal measures to support it (steel sector)... as the recovery will take take a much longer time in India," he said.

The nationwide lockdown since March 25 to contain the spread of coronavirus is scheduled to end on May 17.

Speaking on the challenges of Micro, Small & Medium Enterprises in the sector, Rao said they are not able to get working capital and are facing issues with availability of workforce and logistics movement.

Following the coronavirus-induced lockdown, the total production of crude steel in April this year came down by nearly 65 per cent.

It was produced by only six large players of the sector including JSW Steel. The six big companies could operate on an average of 51 per cent capacity utilization, balance companies' capacity utilization fell by 94.5 per cent.

The top six steel making companies in India are Tata Steel Ltd, JSW Steel, Jindal Steel and Power Ltd, ArcelorMittal Nippon Steel India, Steel Authority of India Ltd and Rashtriya Ispat Nigam Ltd.

During April 2020, demand fell by 91 per cent to just 7 lakh tonne compared to about 7.5 MT of steel in April 2019, Rao said adding that bank lending to the sector also witnessed a significant decline.

Rao said the industry needs to relook at at its entire financial and risk management models, do rationalisation of manpower and undertake other measures to become cost effective.

He further said large steel companies are looking for opportunities available globally. Steel exporting countries like Russia, Japan are badly affected. China has also been affected.

"We need to look at steel importing countries until India recovers," he said.