India's metal sector has suffered a significant blow on account of operational difficulties and poor demand due to COVID-19 and a slow recovery back to pre-pandemic level of production is expected in the coming quarters, Fitch Solutions has said in a report.
According to the report, a severe dent in domestic demand for metals is anticipated and it will take until at least 2022-2023 to return to pre-pandemic levels.
"India's metal sector has been severely impacted by COVID-19 in the year to date, and we expect metal production to experience a slow recovery back to pre-pandemic levels in the coming quarters," Fitch Solutions said.
While local production is likely to find respite in the seaborne market as exports, Fitch Solutions said it believes that will not be enough to offset the decline in domestic consumption, especially as the global demand situation itself remains muted.
A nationwide lockdown was imposed in the country due to COVID-19 from March 25 till May, which severely disrupted economic activity, especially construction, which is the main end-user of metals produced in India.
Fitch Solutions is part of the Fitch Group.
"The persistent state-level COVID-19 movement controls in place since the country lifted the nationwide restrictions amid a still rife COVID-19 outbreak across many major states has continued to weigh on the economy," it said.
While the mining and metals sector was allowed to continue operations, worker absenteeism was rife and most companies operated at 60 per cent of capacity, as per the report.
"Given that India's new daily COVID-19 cases continues to accelerate on a national level, our country risk team has revised our forecast for India's FY21 (April 2020-March 2021) real GDP to contract by 8.6 per cent, from a 4.5 per cent contraction previously," it said.
India's steel sector has faced a severe setback due to the COVID-19 pandemic in the first half of the year, Fitch Solutions said, adding that it expects a slow recovery to pre-crisis levels.
In the longer term to 2029, India will be the global steel production growth bright spot as demand from the construction, automotive and infrastructure industries continue to accelerate, it added.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)