Tag: steel industry

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As far as exports are concerned, ICRA note said the rapid spread of the outbreak to countries other than China have disrupted the seaborne steel trade, and the same is likely to fall further amidst the looming uncertainty surrounding global growth.
As far as exports are concerned, ICRA note said the rapid spread of the outbreak to countries other than China have disrupted the seaborne steel trade, and the same is likely to fall further amidst the looming uncertainty surrounding global growth.

New Delhi: The performance of domestic steel makers is likely to be adversely impacted in Q1 FY2021 as a result of Covid-19 pandemic and the 21-day nationwide lockdown.

As per an ICRA note, domestic firms may have to face challenges such as weak domestic demand, which is likely to lead to inventory pile up exerting pressure on steel prices.

Though reported COVID-19 cases in China have slowed down in recent weeks, globally, there is a spike in reported cases in March 2020. This will keep the seaborne demand muted until the health situation improves.

The seaborne hot rolled coil (HRC) export price offers have plummeted in March 2020 for want of buyers. However, most large domestic steelmakers have continued production during lockdown, given the high shutdown costs.

According to Jayanta Roy, Senior Vice President and Group Head, ICRA, “The Covid-19 and slowing Chinese demand will affect global steel demand-supply balance in the near term. Healthy Chinese production growth had kept global steel production growth at 3.4 per cent in CY2019 but demand destruction in other geographies is expected to halt the growth globally. China’s steel exports are likely to remain low due to outbreak spreading in other geographies despite a recent increase in export rebates.”

“In the domestic scenario, the outbreak and nationwide 21-day lockdown will keep both production and consumption under check in Q1 FY2021. The key demand drivers for domestic steel demand – construction and the infrastructure sectors, besides the automobile and capital goods sectors, continue to witness muted or negative growth.”

As far as exports are concerned, ICRA note said the rapid spread of the outbreak to countries other than China have disrupted the seaborne steel trade, and the same is likely to fall further amidst the looming uncertainty surrounding global growth. During Q2 and Q3, a spurt in exports turned India into a net steel exporter. As for imports, increased scrutiny of shipments and weakenedrupees are expected to keep them low.

The rally witnessed in domestic steel prices since November 2019 is based on supportive international prices, but this is likely to be halted due to the outbreak. Domestic HRC prices stood at Rs 38,000 per tonne in March 2020, and given the choking of demand amidst the lockdown, a correction looks highly likely in the next quarter.

On the demand outlook, ICRA said it is not expecting a rebound in steel consumption growth in FY2021. As against a growth rate of 3.8 per cent in FY2020, consumption growth is likely to settle at around 2-3 per cent in FY2021, given that Q1 could be a very weak quarter.

With the export market also remaining tepid, and incremental capacity addition of 10 mtpa, industry capacity utilisation rates are seen to be lower from 81 per cent in FY2020 to about 79 per cent in FY2021 assuming a recovery in demand conditions in the second half.

“Margin improvement is unlikely in FY2021; consequently, Indian steel industry‘s debt protection metrics are likely to remain subdued in FY2021. The industry’s Total Debt, which improved to 2.9 times during the upcycle in FY2019, is expected to deteriorate to around 4 times in FY2020 and FY2021. The fall in the industry’s earnings can also be gauged from the credit ratio of our rated portfolio, which stood at 0.8 times in 11M FY2020,” said Roy.

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The key demand drivers construction and infrastructure sectors besides the automobile and capital goods sectors, continue to witness muted or negative growth due to coronavirus pandemic.
The key demand drivers construction and infrastructure sectors besides the automobile and capital goods sectors, continue to witness muted or negative growth due to coronavirus pandemic.

New Delhi: The performance of Indian steel players is likely to be affected in the first quarter of 2020-21 due to the coronavirus outbreak and the subsequent nationwide lockdown, according to ICRA. Domestic firms may have to face challenges such as weak domestic demand, which is likely to lead to inventory pile-up exerting pressure on steel prices, the ratings agency said in a statement.

“The outbreak of coronavirus and associated lockdown will keep both production and consumption under check in Q1 (first quarter) FY21. As a result of Covid-19 pandemic and the 21-day nationwide lockdown, the performance of domestic steel makers is likely to be adversely impacted in Q1 FY21,” it said.

Jayanta Roy, Senior Vice President and Group Head, ICRA said the Covid-19 and slowing Chinese demand will affect global steel demand-supply balance in the near term.

In the domestic scenario, the key demand drivers –construction and infrastructure sectors — besides the automobile and capital goods sectors, continue to witness muted or negative growth, Roy said.

As far as exports are concerned, Icra said, the rapid spread of the outbreak to countries other than China has disrupted the seaborne steel trade, and the same is likely to fall further amid the looming uncertainty surrounding global growth.

As for imports, the increased scrutiny of shipments and weakened position of the rupee are expected to keep them low.

The rally witnessed in domestic steel prices since November 2019 is based on supportive international prices, but this is likely to halt due to the outbreak.

The agency also noted that domestic hot rolled coil(HRC) prices stood at Rs 38,000/MT in March 2020, and given the low demand amid the lockdown, a correction looks highly likely only in the next quarter.

Roy said: “We are not expecting a rebound in steel consumption growth in FY2021. As against a growth rate of 3.8 per cent in FY2020, consumption growth is likely to settle at around 2-3 per cent in FY2021, given that Q1 could be a very weak quarter. Margin improvement is unlikely in FY2021.”

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JEE slashed its full-year earnings forecast, predicting a record $1.75 billion in net loss.
JEE slashed its full-year earnings forecast, predicting a record $1.75 billion in net loss.

TOKYO: JFE Holdings Inc, Japan’s second-biggest steelmaker, said on Friday it would cut its steel capacity by 13% by shutting a blast furnace by March 2024 due to weakening demand from manufacturers hit by the U.S.-China trade war.

“We are facing an unprecedented and extremely challenging operating environment due to slumping steel demand from manufacturing industries hit by the U.S.-China trade war and rising prices of raw materials driven by China’s increased output of steel,” JFE Steel President Yoshihisa Kitano told a news conference.

The company forecast an impairment loss of about 220 billion yen ($2 billion) on its production facilities in Chiba and Kawasaki, near Tokyo, in the current business year ending this month.

As a result, the steelmaker slashed its full-year earnings forecast, predicting a record 190 billion yen ($1.75 billion) in net loss, compared with its prior estimate of a net profit of 13 billion yen.

Under the restructuring plans, it will close a blast furnace and other facilities at the East Japan Works (Keihin) in Kawasaki in the year that ends March 2024.

Japanese steelmakers are also facing waning domestic demand due to a decline in population.

Last year, crude steel output in Japan, the world’s third-biggest steel producer, fell 4.8% to 99.28 million tonnes from a year earlier, edging below 100 million tonnes for the first time in 10 years, the Japan Iron and Steel Federation said.

In February, Nippon Steel Corp unveiled a plan to shut nearly 10% of its production capacity, an unprecedented move in the once-dominant Japanese steel industry hit by falling demand at home and competition from China.

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The statement from JSW Steel also said it had been taking various precautionary it measures to ensure the safety and health of the employees and their families
The statement from JSW Steel also said it had been taking various precautionary it measures to ensure the safety and health of the employees and their families

KOLKATA: JSW Steel, one of the country’s largest private steel companies, has decided to scale down/ suspend production at its units in the wake of the global outbreak of novel Coronavirus (COVID-19).

“Following the call given by Prime Minister Narendra Modi on March 24 for a 21-day nationwide lockdown (w.e.f March 25, 2020) and the various advisories/directives issued by local Municipal Corporations, State and Central Governments considering the evolving scenario of complete lockdown with exception to certain specified essential activities, the manufacturing operations in all of our locations have since been either scaled down or suspended (in certain locations),” the company said in an official notification to the BSE on Wednesday.

The move will affect the capacity utilisation which is expected to go down significantly during this period of lockdown, the statement added.

“The overall adverse impact on the operations of the company during the period of this lockdown, on account of the above and the expected financial impact, is not ascertainable at this stage,” the statement added.

Steel is classified as an essential commodity under the Essential Services Maintenance Act, 1981 (ESMA). However, the company said it has taken the decision “to scale down / suspend production to support the cause of containment of the pandemic COVID-19, notwithstanding the exception to manufacturing units with continuous operation and the units producing essential commodities.”
JSW Steel said it will continue to “closely monitor the situation and take appropriate action as per the directions issued by regulatory authorities from time to time, keeping in view the health and safety of all of its employees and their families and the interest of the nation at large.”

The statement from JSW Steel also said it had been taking various precautionary it measures to ensure the safety and health of the employees and their families, at all its offices and manufacturing locations in India and abroad.

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