Effect of Country Lockdown on Steel Industry

The lockdown in India and around the world is having adverse effects on many industries. Many of the sectors are worst-hit by the same and the steel industry too has had to bear the brunt of the lockdown. While it’s a necessary fight for the greater good of mankind, it is imperative to reflect upon the impact of the same on industries to gauge the extent of losses in order to devise a plan to overcome the same.

Key players in the domestic steel market have been forced to shut down operations of many of their manufacturing plants. Even the demand for steel has come down. This sudden halt in the requirement and production will lead to a lowering of the steel prices, thus making way for further losses. Moreover, China’s steel output has declined and China being the largest supplier of finished steel and steel products to India has resulted in the shortage of steel supply. (Source)

The lockdown has led to a nationwide suspension of transport services. The trucks that were the backbone of the steel industry, transporting goods from here to there, are no longer operational and the same is impacting the dispatch of steel products. Most steel companies keep iron ore required for one or two months as a backup near the factory. Still, it would be difficult to carry the same back to the factory due to the unavailability of transport. On the other hand, the construction and infrastructure industry that accounts for around 60 percent of the steel usage too has come to standstill. The same is resulting in the reduction of steel demand.

The lockdown and shutting of manufacturing plants also mean the stoppage of blast furnaces. About half of India’s crude steel output is a result of the blast furnaces. The sudden halting of the blast furnace operations will have unfavorable outcomes like solidifying of hot metal inside the furnace leading to permanent destruction to refractories of the blast furnace and other cooling elements. Moreover, restarting the same has various health dangers like getting hit with equipment, burns, fire, slipping, falling objects, electrocution, etc.

India’s steel ministry secretary Binoy Kumar urged the government to allow the production, supply, and distribution of steel and raw materials under the Essential Services Maintenance Act of 1981. He also brought to notice that the act classifies businesses “dealing with the production, supply or distribution of coal, power, steel or fertilizers” as “essential services”.

Union Minister Dharmendra Pradhan said that the impact of the lockdown on the global steel industry will be felt for up to 2-3 years now that operations in China, the largest producer of the steel, have been halted.

A way out of this can be the permission to continue the production of steel with regulated working hours and with half the workforce and sufficient precautions. The same will at least result in a minimum break even. Once the lockdown is lifted, the production can begin at the normal rate with minimum cost to generate profits.