Weak economic activities, rains impact overall steel demand: Tata Steel

Domestic giant Tata Steel on Thursday said overall steel demand in the second quarter of 2019-20 was impacted due to factors such as rains and subdued economic activities that also plummeted vehicle sales.

Tata Steel India recorded an output of 4.50 million tonne (MT) in the second quarter as against 4.30 MT in the corresponding quarter of the previous financial year. Its sales volumes during the quarter, however, took a hit recording 4.14 MT sales as compared to 4.32 in the year-ago quarter.

"During the quarter, overall economy activities in India further weakened as reflected in low investment sentiment and demand slowdown as is evident in plummeting vehicle sales and weak GST collections. This combined with a seasonally weaker monsoon quarter adversely affected overall demand for steel," Tata Steel said in a statement here.

The Indian government has announced various measures to stimulate economic activities and market sentiments, it said and added that, however, the benefits of the same in terms of new private investments and improved domestic consumption will potentially manifest only in the longer term.

It said the recent rate cuts by the Reserve Bank of India are a welcome step to improve liquidity though transmission of the rate cuts is not evident and, hence, the credit offtake has not yet picked up.

"However, as the monsoon season comes to an end and the festive season starts, an improvement in sentiment is expected to trigger a pick-up in consumption and, thus, steel demand," it said.

Tata Steel India's second quarter sales volume increased by 5 per cent quarter-on-quarter primarily with better volumes at Tata Steel BSL.

During the quarter, lower volumes at the automotive segment were compensated by higher exports, while deliveries in branded products and retail segments and industrial product and projects segments were maintained.

About the global business, it said the "confidence remained subdued during 2QFY20 as weakening economic activities and prolonged uncertainty over trade conflicts impacted investment decisions and trade flows. The accommodative monetary policy stance by key advanced and emerging market economies is yet to show any noteworthy impact on economic activity levels."