Steel companies slash production in view Covid-19 epidemic
The country’s largest public sector steelmaker Steel Authority of India (SAIL) has pruned production by half amid nil demand from both the end-users and traders in view of the Covid-19 epidemic. Others, including the private sector’s Tata Steel have also cut production, although the extent of reduction is not immediately clear.
“The cut in production is about 50% across the plants as there is no off-take of finished steel. The inventory during March 2020 itself has gone up by about 3 lakh tonnes because of postponement/ cancellation of orders by end consumers as well as traders,” SAIL chairman Anil Kumar Chaudhary told FE.
Chaudhary said signs of less appetite had started showing since the middle of February, which became all the more prominent from the beginning of March. Ultimately, by March 20, orders dried up as traders decided to wait and watch. “As the lockdown came into force, we were forced to bring down the production by almost 50%,” he said.
SAIL had produced 11.84 million tonne in the first three quarters of 2019-20 and posted a net profit of Rs 704 crore. It has around 20 MT crude steel-making capacity across five integrated steel plants. All steel stocks ended in the red in the Bombay Stock Exchange (BSE) between 1.22% and 14.42%.
In a statement, Tata Steel also said based on the specific guidance and approvals received from the relevant district administration, the company’s mining operations have been operating normally but the integrated steel facilities in Jamshedpur, Kalinganagar Angul (Tata Steel BSL) and Gamahria (Tata Steel Long Products) have started reducing production levels and operations in the downstream facilities have been suspended and put on care and maintenance mode.
“In view of the restrictions in the despatch of finished goods and poor market conditions due to the shutdown of customer operations in automotive, construction and other segments, shipments to customers have been curtailed. The company is focused on conserving cash and liquidity, and are reducing the cost base to align with the operating and market situation with strong focus on working capital management,” it said.
However, all payments to MSME vendors and contract workers are being done on due dates.
The company said it is keeping close tabs on the evolving situation and has taken several initiatives to ensure that the operations are in a state of readiness to ramp back as the situation improves and normalcy is restored.
In Europe, Tata Steel continues to supply steel products for vital sectors like food packaging, where demand has increased for canned food. However, overall European steel demand has sharply reduced compared to the normal conditions and many of the company’s customers have paused production, including European car manufacturers. “Tata Steel Europe has, therefore, reduced production at some of the European mills to match this lower demand,” it said. Tata Steel Europe is currently operating all four blast furnaces at a reduced level across the two steel-making hubs – IJmuiden in the Netherlands, and Port Talbot, Wales, and customer despatches continue, albeit at the revised levels.
World’s largest steelmaker ArcelorMittal, which operates in 60 countries with a capacity of 90 million tonne per annum, has pruned its production at the Hazira facility in Gujarat. JSW Steel has also reduced production.
Source: Financial Express