India: ArcelorMittal Nippon Steel Optimistic on Future Demand

During a brief interaction with SteelMint recently, Ranjan Dhar, Chief Marketing Officer, ArcelorMittal Nippon Steel India (AMNS), shared insights on both the company's performance during the pandemic as well as the emerging market scenario in India, South East Asia and China, expressing optimism about an imminent demand revival in the Indian steel sector in and after July. Below are highlights from the conversation:

-- Production During Pandemic

AMNS had to curtail operations after the lockdown was announced but of course, certain continuous processes were on. "As a steel manufacturer, we produce according to orders and not stocks. The production follows real demand as opposed to speculative demand. During this lockdown, we have survived through small domestic sales and exports. I believe the situation is changing since the beginning of May and domestic demand is slowly emerging. We have ramped up to 60-65% capacity now from 30-35% in April and ramp-up is still going on. Our first priority is to cater to domestic customers," says Dhar.

-- Export Bookings

There have been significant export bookings from India in April and still continuing in May. The epicentre, however, is South East Asia and China. There is demand for both flat and long products, although AMNS doesn't deal in longs, says Dhar. The company wants to first cater to domestic customers and only the extra volume goes for exports.

-- Outlook on HRC Prices

Prices are surging beyond USD420 levels because of increased activities in China. Surprisingly, China's automotive sector has recorded 6.5% growth in production in April 2020 compared to April 2019. This shows how strong the demand bounce back in China is. The country has witnessed remarkable 'V'-shaped growth after the lockdown and there are rumours that at the Politburo meeting slated from May 22 onwards a fresh stimulus package would be announced by the Chinese government to further boost demand. There is, therefore, strong demand pull from South East Asia and China.

-- No Inventory Pressure

All steel mills curtailed production during the prevailing lockdown and whatever semis and long products that were produced were largely exported. So there is no inventory pressure on Indian mills. "In fact, when demand will bounce back there will be very little inventory with steel producers," says Dhar. Domestic HRC prices are staying firm which shows that the apprehension that the market is saddled with inventory is wrong. In fact additional demand is getting created. More and more people will buy two-wheelers and small cars to avoid public transport in the days to come. Fear of Covid-19 is obviously one reason but the aspiration for individual mobility is the main driver. "Who knows there could be a 'V'-shaped recovery in India in June and July very similar to that in China," wonders Dhar.

-- Way Forward

"India should emerge as the epicentre of global steel demand. Rural per capita demand is still a measly 11 kg. Even 1 kg increase in that will result in steel demand shooting up. The government should introduce measures to facilitate and incentivize mass manufacturing to boost steel demand in India," rounds off Dhar.

~ Inputs by Nirmalya Deb