Steel demand to contract as pandemic culls end-use

With Covid-19 casting a long shadow over a much-anticipated mild recovery in fiscal 2021, the Indian economy needs to steel itself. Along with external factors such as weak global demand, supply disruptions, and worldwide financial shocks, the economy is grappling with lockdown, factory shutdowns, reduced discretionary spending, and delayed capex cycle. We expect this perfect storm to affect construction activities and automobile production, and thereby, steel demand.

So, how low will steel demand go? Given the uncertainty in the current environment, we have based our analysis on two possible scenarios (baseline and pessimistic) with regard to the spread and containment period of the pandemic.

Steel demand growth in this fiscal based on possible scenarios

In our baseline scenario, steel demand in India would contract 14-17% this fiscal. Extended vulnerability, on the other hand, will increase the demand contraction to 22-25%.