Ratings agency ICRA in its latest report has said that demand for steel in India is likely to decline by upwards of 20 percent in ongoing financial year (FY21), which will be the sharpest fall on record. Consequently, it has revised its outlook for the sector to negative from stable as the domestic steel demand is expected to remain subdued until the COVID-19 pandemic is brought under control.
The rating agency has stated that quickly rebooting the steel industry from hibernation is going to be a tough task. It warned that the first half of financial year 2020-21 is expected to be especially challenging for steelmakers. It also said many buyers could prefer to sit at the sidelines, given the uncertain demand environment and liquidity pangs of steel consumers, amid dwindling sales and fixed cost obligations.
According to the report, despite higher borrowing levels of state governments that have been allowed subject to conditions, infrastructure spending by the Centre and states could be partly deferred to the next fiscal due to dwindling tax collections currently, limiting the possibility of a sharp bounce back in steel demand post the lockdown. It noted that key steel consuming states like Maharashtra, Gujarat, Delhi, Tamil Nadu, Andhra Pradesh, Telangana, Rajasthan and Punjab have a sizeable portion of their population living in districts marked as red zones, and with around 51 percent of the urban population living in red zones, the steel demand from the construction and real estate sectors could take some time to return to the pre-COVID-19 levels.
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