Steel demand to contract by at least 20% this fiscal: ICRA
New Delhi: The demand for steel in the ongoing fiscal will go down by about 20 percent. This will be the maximum yearly decline in demand for steel in nay year in the past, said ratings agency ICRA in its latest report. ICRA also revised its outlook for steel sector from stable to negative.
The demand for steel in the country will continue to be muted till the time there is corona outbreak. The first six months of the current financial year are going to be “very challenging” for the steel sector. For the industry to recover from the current demand slump is going to be tough.
The ratings agency expects many of the steel buyers to sit at the fence and wait for the current negative business environment to ease. Even the infrastructure construction activities of the central and state government could be stalled in the current fiscal and pushed out the next fiscal as there are prospects of much lower tax collections. This will result in lower steel demand.
The main states for steel demand like Tamil Nadu, Telangan, Maharashtra, Andhra Pradesh, Punjab and Rajasthan have many of their districts in the red zone and since about 51 percent of the population in these states is living in red zones, there are chances of postponement of construction activities in these states.
The problem is further compounded by factors such as migration of labourers and paucity of raw material. There are liquidity concerns and shortage of working capital with many companies. These factors will further challenge the demand for the steel in the country.
These factors may impact the operating profitability and even debt protection statistics of steel companies in the current fiscal.