Impact of COVID 19 on Steel Industry – A case Study of RINL, Visakhapatnam Steel Plant

International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-11, Issue-4 (August 2021)
www.ijemr.net https://doi.org/10.31033/ijemr.11.4.15
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Impact of COVID 19 on Steel Industry – A case Study of RINL,
Visakhapatnam Steel Plant
Pradosh Kumar Rath1
and Prof. B. Mohan Venkata Ram2
1
Chairman-cum-Managing Director, Rashtriya Ispat Nigam Limited, Visakhapatnam, INDIA
2
Professor. Department of Commerce & Management Studies, Andhra University, Visakhapatnam, INDIA
1
Corresponding Author: mbvr2008@gmail.com
ABSTRACT
Steel is by far, the most widely used and is
environment friendly as it can be recycled 100%. Steel has
wide variety of applications in day to day life. Indeed, steel
is the backbone and support of the global economy and
infrastructure. Steel has got many forward linkages with
manufacturing industries.
Status of global steel industry before the onset of
COVID 19 and the effect of pandemic on industry in both
global and Indian contexts were discussed. The status of
Indian economy was briefly explained and projected
outlook for steel market after breakout of the pandemic.
The effect of COVID on RINL was discussed in detail and
various strategies adopted by the industry during the
period were explained. Handling of such future
eventualities were addressed. After the outbreak, the
recovery and outlook were explained in detail.
Interventions and initiatives sought from the Government
were presented in this paper.
Keywords-- COVID – 19, Infrastructure, Manufacturing,
Global Economy, Pandemic
I. INTRODUCTION
Steel, as a precious metal, has a greatest impact
on the human race since ages. It is, by far, the most
widely used, multifunctional and adaptable natural
material found and mined from the earth. In fact, the
development of mankind itself would have been
impossible in this scale without the invention of steel.
Steel has umpteen number of uses in today’s world,
which is a marker for its incredible adaptability. Among
the defining characteristics of Steel are... Heat resistance,
Resistant to Deformation at both high and cold
temperatures, Weldability, Corrosion resistant,
Machinability, Formability to both hot and cold, Wear
resistance, Toughness, being Weather-proof etc.
Additional advantage of steel is its very low production
cost, when compared to other materials. Steel is
environment friendly as it can be recycled 100%. The
energy required for the production of steel is also 25%
lower than that of aluminum and other non-ferrous
metals. Moreover, the earth’s crust is comprised of 5.6%
iron and hence abundant availability, so this represents a
secure raw material base for the production of steel.
Stainless steel, developed by British
metallurgist, Harry Brearly, is used in most of today’s
gadgets, machinery, tools, household goods, and more.
From surgical tools to the hub caps on your car, to
kitchen utensils, building materials, and even furniture,
stainless steel is extremely versatile. Indeed, steel is the
backbone and support of the global economy and
infrastructure. It’s a massive industry worth
approximately $900 billion per year. Steel has some stiff
competition from aluminum.
The global crude steel production is 1541.77
Million Tonnes in January-Oct 2019 and registered a
growth rate of 3.2% over CPLY (corresponding period
last year). With 829.21 Millon tonnes of steel
production, China still occupies the position in the world
as highest crude steel producer. India, occupying the
second largest crude steel position with 93.31 Million
tonnes of crude steel production during the same period.
WSA published the Short Range Outlook in April 2019,
as per the report there is an improvement of about 4.9%
in apparent global steel consumption during 2018
whereas, China recorded a growth rate of 7.9%. During
2018, global and China per capita finished steel
consumption was 224.5 kg and590.1 kg respectively [1].
The Indian finished steel per capita consumption was
during the same period was 74.1 kg. [2]
China’s share of crude steel production in the
world is 49%, However, it is expected that China’s steel
demand to decrease in the coming period due to lack of
motivational measures. Due to uncertainty over trade
policies, Expected China’s reduced demand for steel,
melt down in global economy and contemporary
political situation in many regions there may be restraint
in business investments. This situation is forcing global
steel industry to most unwanted sluggish phase. All this
happened because of the built in excess capacities than
the steel demand and creating additional burden on the
global steel industry.

Table 1: Region/country wise apparent steel consumption and YoY % growth
Regions
In Million Tonnes) Y-o-Y Growth Rates, %
2018 2019(F) 2020(F) 2018 2019 (F) 2020(F)
World 1 712.1 1 735.0 1 751.6 4.9* 1.3 1.0
China 835 843.3 834.9 7.9 1.0 -1.0
India 96 102.8 110.2 8.3 7.1 7.2
Emerging and Developing
economies excl. China
463.2 476.5 498.6 2.5 2.9 4.6
Developed economies 414 415.2 418.1 1.8 0.3 0.7
F – Forecast Source: WSA SRO – Apr ‘19
* 2.1% (after adjusting for China induction furnace closures)
II. INDIAN ECONOMY
For the last 5 to 6 years, Indian economy has
been a fastest growing major economy and exceeded
China. India’s economy is growing enviably. The GDP
growth stood at 6.8% in the year 2018-19 and the same
in 2017-18 was about 7.2%. The overall GVA growth
was also in the same lines and stood at 6.6% for 2018-19
when compared to 2017-18 the GVA was around 6.9%.
It can be observed that there was a decreasing trend from
first quarter i.e. 7.7 % to 6.6 % in 4th
quarter.
Manufacturing and Construction sectors recorded GVA
growth rate of 6.9% and 8.7% respectively, during 2018-
19.[2]
6.4
7.5 8.1 8.0
7.2 6.8
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
GDP Growth (%)
6.9
7.7
6.9 6.3 5.7
6.6
2017-18 Q1, 18-19 Q2, 18-19 Q3, 18-19 Q4, 18-19 2018-19
GVA Growth (%)

III. INDIAN STEEL SCENARIO
India recorded apparent steel consumption
growth rate of 7.5% and 7.9% respectively in the years
2018-19 and 2017-18 respectively. Whereas the exports
reduced by 34% to 6.361 Mt in 2018-19 from 9.619 Mt
during 2017-18 due to uncertainty over trade policies,
melt down in global economy and contemporary
political situation in many regions. All these reasons
caused This led to accumulation of inventory with Indian
Steel Producers, even though the growth in production is
low when compared to previous year and stood at 4.4%
with respect to 6.8% in the previous year.
The reduction in Exports for non-flat category
was even higher at 69%. The exports dropped down to
0.705 Mt in 2018-19 from 2.258 Mt in 2017-18. The
inventory has raised to 2.157 Mt of non-flat steel
production. Due to all these reasons, steel prices
softened considerably during second half of 2018-19.
Though, the raw material prices remained high, showed
negative effect on the financials.
The prices of raw materials particularly the
main raw material for steel making i.e. Iron Ore prices
increased sharply during the period Apr–Nov’18. This
was attributable to mine closures in Odisha. NMDC
increased cost of Iron Ore fines by 27 % from Rs. 2,560
/t in April, 2018 to Rs. 3,310 /t September, 2018 and
maintained this high cost till November, 2018.
Moreover, RINL had to resort to auction, tender routes
to meet the requirement of raw materials for
procurement. This has resulted in overall procurement
cost increase to the tune of 27% during 2018-19 over
2017-18.
49151 49702 48715
45119 46879
49824 47614 48012
45241 44826
47452 47515
56640 54776 54351 54737 55554 57569 56170 56362 54189
50328 50964 51931
JPC Prices - Mumbai (Rs/t)
TMT 25mm (Mum) HR Coils 2.5mm (Mum)
2560 2660 2660 2810 2960
3310 3310 3310
2860
2560
2760 2760
Iron Ore Fines (Rs/t)

Likewise imported Coking Coal prices also
heaved from August 2018 to December 2018 due to
supply constrictions from Australia.
Added to the above, Indian rupee value also
depreciated with respect to US Dollar to an average of
Rs.69.83 in 2018-19 from an average of Rs.64.50 in the
2017-18.
The domestic steel demand which was slightly
sluggish was provided a boost in the Union Budget
2019. The Finance Minister announced Rs.100 lakh Crs
allocation for infrastructure in the next 5 years, and gave
thrust to the projects such as Industrial Corridors,
Dedicated Freight Corridor, Bharatmala, Sagarmala &
UDAN schemes. Schemes already announced like the
Pradhan Mantri Awas Yojana; Har Ghar Jal scheme;
Pradhan Mantri Gram Sadak Yojana and the flagship
“Make in India” programme of the Government,
Housing for all and affordable housing and the smart
cities mission will also provide the necessary fillip in
increasing the per capita consumption of steel in India.
India's enviable GDP growth rate of 6.8 % in
FY 2018 and projected growth rate of 7.1% is supported
by two vital macroeconomic pillars – 1. A favourable
climate for investment and 2. Healthy growth of the
manufacturing sector. Government investment in
physical infrastructure is, indisputably, the single
greatest motivation to the Indian steel industry for its
steps to enhance the production capacity, with the
National Steel Policy 2017 predicting per capita steel
consumption to increase up to 160 kg by 2030 from a
low value of 70.9 kg when compared to world average in
2018, which explains the requirement of augmentation
of capacity to about 300 MTPA by 2030. [3]
IV. ONSET OF COVID-19
The year 2019 began with the above
expectations and went on well till November 2019. The
pandemic COVID-19 started in China in December,
2019. Slowly the pandemic spread all over the world and
global economies were shattered. Most of the steel
producing countries in the world started implementing
lockdown measures as a last resort to contain the spread
of COVID-19. As a result of the pandemic, an estimated
2.7 billion people or more than four out of five workers
in the global workforce, have been affected by
lockdowns and stay-at-home measures. In India, lock
down was imposed from 24rd
March, 2020 and till that
time the production was in full swing. The effect
continued till September 2020. Because of the lock
downs, production capacities in most of the steel plants
were curtailed. In some of the steel plants, even blast
furnaces were stopped which is a very rare thing to
experience in any integrated steel plant. Even the
produce could not be sent to markets due to logistics
problem. All the activities relating to infrastructure came
to a standstill during the period and none of the steel
consuming sectors like, construction, engineering,
automobile etc. were in operation. During the period,
most of the steel plants faced the liquidity crunch and
suffered a lot. The sudden fall in demand has also put
brakes on a steady rise in steel prices. The impact of a
slowdown in global demand on the domestic sector was
limited as steel producers export only 8 per cent of their
total production. But since the metal industry has strong
forward linkages to many important sectors such as
automotive, construction, infrastructure and
manufacturing, a slowdown in business activity in these
sectors has inevitably driven down the derived demand
for metals.
Effect on Raw Materials (Upstream side)
As steelmakers around the world operated at
reduced capacity, it is pertinent here to mention the
impact of the COVID-19 pandemic on the mining
sectors. Australia is undoubtedly the key supplier of iron
ore and metallurgical coal and its exports are about 60%
of the global seaborne supply in 2019. Luckily,
Australian mining operations and logistics of these two
major raw materials have proved quite robust during the
COVID-19 pandemic. Their automation levels and
logistics have paid dividends during this tough period.
Lockdowns sprea dingall over the world, which
indirectly effected transportation during Covid-19, have
led to decrease in raw material stocks in many steel
plants, particularly those who have not maintained large

enough stock to manage production during pandemic
period got affected maximum. Even in Brazil, the second
largest iron ore supplier in the world also did not get
effect much during 2020.
Whereas, the situation in India, Canada and
South Africa is different. Operating restrictions for
mines have decreased mining output. These three
countries accounts for about 10% of global seaborne iron
ore supply in 2019. As India is biggest importer of
seaborne metallurgical coal suffered most because of the
nation-wide lockdown in India.
V. EFFECT ON STEEL
PRODUCTION
Coming to the steel production scenario, crude
steel production around the world deteriorated after the
onset of the pandemic. World crude steel production has
reduced by 13 percent when compared to April 2019, in
April 2020 the steel production was 131.1 million
tonnes, and 148.8 million tonnes in May’20 which was
8.7% lower as compared to May 2019. Japan produced
5.9 Mt of crude steel in May 2020, down by 31.8%
compared to May 2019. India produced 5.8 Mt of crude
steel in May 2020, down by 39.1% from May 2019.
According to World Steel Association, the
Covid-19 pandemic and associated lockdown measures
have significantly affected production volumes by many
steelmakers worldwide. [4] China registered crude steel
production was 85.0 million tonnes in April 2020there is
no change from the April 2019 production. Throughout
the virus outbreak, many blast furnaces in China
operated at normal capacities.
Effect on Major Steel consuming Industries
(Downstream Side)
As per the International Organization of Motor
Vehicle Manufacturers report, global automotive
production reduced by 16% last year due to the COVID-
19 pandemic and subsequent efforts to suppress the
spread. When it comes to the United States the
automotive production drop was about 19%, slightly
above the global average. In Europe, automotive
production fell by 21% on average, all other main
automotive producing countries reporting drops between
11% and up to almost 40%. South America saw
production fall more than 30% as Brazil took the impact
of COVID hard, and vehicle production in Africa slipped
more than 35%.
Asian producers fared better than vehicle
manufacturers elsewhere. Automotive production on the
world’s largest continent fell only about
10%.“Organisation Internationale des Constructeurs
d'Automobiles” (OICA) reported that China’s
accelerated recovery through vehicle production and
restricted the fall to only 2% over the year. Asia’s share
of global vehicle production is 57% share of global
vehicle production. South Korea’s car production
dropped down by 22% in April 2020when compared to
the previous year and also car exports reduced by 44%.
The country’s car exports to the US itself reduced by
28% in April from previous year same period. However,
the pressure on the manufacturing sector was continued
for the rest of this year. In China also, most metals
markets do not predict a real recovery until Q4 [5].
China Recovery
China is the first country to come out of the
coronavirus crisis and worked toward full normalisation
of economic activity. China’s economic activity froze
during the lockdown in February, with manufacturing
Purchasing Manager’s Index (PMI) dropping to 35.7,
Since a resumption of operations led by the coastal areas
started in late February, an economic recovery has been
gradually taking place and the Chinese PMI jumped to
52 in March2020. Light is now visible at the end of the
tunnel as the post COVID-19 pandemic shows recovery
in China and large scale government stimulus indicates
that the industry should be able to weather this storm.
China produced 92.3 Mt of crude steel in May
2020, an increase of 4.2% compared to May 2019. China
which started early after the pandemic is looking
forward to a gradual economic recovery. Due to its
-40
-30
-20
-10
0
10
20
0
50
100
150
200
Growth
(%
Y-on-Y)
Production
Mt
Months
Global Crude Steel Production
World Crude Steel production
ROW Crude steel Production
China Crude Steel Production
World % Change
Rest of World % Change
China % Change

comparatively robust requirement or Consumption,
China found itself in the rare position of being a target
for steel exports from countries including India, Japan,
Russia and Turkey. Over January-April, China’s finished
steel imports grew 7.4% to reach 4.18 million Mt, while
its exports were almost 12% lower at 20.6 million tons.
China is currently the biggest buyer of billet.
Fortunately, recovery in China, the biggest
driver of steel industry demand in the world, and its
Shipbuilding activity is back to 90% production levels.
State infrastructure projects have been mandated by the
government to return to pre-crisis levels of activity. The
automotive industry has increased to 30% production
levels. The speed with which the country is returning to
normalcy indicated future steel demand.
Global Recovery
Around the world, the steel industry is crawling
back to normalcy and although it is expected to contract
by more than 10% in 2020, it will see a substantial
recovery in 2021.
As economies are re-opening after lock downs
in most of the steel producing countries, steel companies
are striding forward cautiously. Health & safety of
workforce being paramount importance, companies are
strictly adhering to the procedures as mandated by
various governments, even risking lower productivity
and an extended production cycle. The dual objective of
“live & livelihood” is making companies go the extra
mile in ensuring the safety of their workforce.
VI. EFFECT OF COVID-19 ON
INDIAN STEEL SECTOR
After the onset of pandemic, Indian steel
production was slashed by an unprecedented 65.2
percent, year-on-year, in April. Unbelievably, April
month’s production figure was just 3.1 million tonnes.
[2]
In contrast to metals prices generally, prices of
seaborne iron ore have been remarkably resilient, even
during the worst months of the COVID 19 outbreak,
because Chinese crude steel production continued
largely persistent.
Indian players are on expansion plans in line
with the Government’s target of scaling up the total
steelmaking capacity to 300 million tonne per annum
(MTPA) by 2030. Government has been very proactive
with policy responses to manage the potential economic
consequences. The effect of COVID-19 pandemic
impacted the expansion plans of domestic steel makers.
Any Organizations’ first priority in crisis times is
ensuring the health and safety of work force. Now, as
organizations begin to emerge from this phase, leaders
are focusing on the next set of workforce challenges as
they plan for recovery.
VII. BRIEF INTRODUCTION OF RINL
Rashtriya Ispat Nigam Limited (RINL), the
corporate entity of Visakhapatnam Steel Plant (VSP) a
Navratna company is a first shore based integrated steel
plant at Visakhapatnam in Andhra Pradesh under the
Ministry of Steel, GOI. Visakhapatnam Steel Plant
(VSP) is the latest in the public sector steel plants
conceived by the Government of India (GOI). It is now
known for the quality of its products and as the leading
producer of long products & value added steels. VSP is
on the growth path and is almost doubled its capacity to
a level of 7.3Mt of liquid steel progressively.
Outlook and Effect of COVID on Rashtriya Ispat
Nigam Limited in 2019-20 & 2020-21
India was projected to maintain a growth of
7.1% in 2019, the highest among the major steel
producers of the world. The thrust being given by the
Government for infrastructure and manufacturing would
have positive impact on steel industry in general and the
company in particular. The company would further gain
from productivity and efficiency improvements and
value growth planned for 2019-20.
Some of the focus areas before the onset of Covid-19
for RINL are:
 Achieving rated capacity for 6.3 Mt
 Enhancing production of high end Value Added
Steel
 Improving sales in high NSR region
 Maximizing conversion of semis
 Commercial production from Forged Wheel
Plant
 Minimising impact of bought out BF coke by
improving PCI usage and commissioning of
Battery-5
 Optimization of product mix, concentration on
niche markets and high end value added
products.
The performance of RINL during pre and post
COVID periods is presented below to demonstrate the
pandemic effect on RINL.
Coke is one of the very important constituent
required for iron make through Blast furnace route. Coke
production has been reduced (started) in the month of
march and continued till Nov., ’20 as two Blast furnaces
were under shut down due to inventories piled up, lock
down and low man power availability.

Base mix is required to produce sinter for
charging into Blast furnaces as charge material. As only
single blast furnace was in operation sinter requirement
has been dropped down to one third of regular
production. However, the period has been utilised to
complete capital repairs and maintenance jobs
requirement. The production in March was 8,50,000
tonnes and the same has been reduced to 4,59,000 tonnes
in April’ 20 and further reduced in next four months.
Same is the case with Sinter production also.
Blast Furnace-2 was put down on account of
lower market demand from 25th Mar'20 to 15th July'20
(113 days). The furnace was again restarted with in-
house expertise on 16.07.20. Blast Furnace-3 was put
down on account of lower market demand from 13th
Apr'20 to 17th Oct'20 (188 days). The furnace was
restarted with in-house resources on 18.10.20. Stopping
of Blast furnaces is a rare feat in any steel plant. Because
of the pandemic Blast Furnaces were stopped for almost
six months in RINL.

Crude steel production has been dropped down
to lowest during the period and the same is presented
below.
Number of heats is the measuring tool for steel
production. Before pandemic the same was 110 heats per
day and in May it has reduced to lowest and stood at 35
when 6 steel making converters were in operation. These
months have become night mare for RINL.
Due to lack of domestic demand, finished steel
production has been reduced to lowest ever in RINL.
However, during the period, export market was explored
and semis were exported to other countries especially to
china. Though the finished steel production was less, the
saleable steel production was substantially high with
export market of semis to china. During the period,
exports were almost 1.3 Mt which is a record since
inception. The same is presented in the below two
figures.

One more initiative of RINL was to increase the
Value added steel production during the period. This is
to gain more NSR with less production and resources for
immediate survival. The value added steel production
was always 80 % of the total saleable steel produced.
This has helped RINL to survive during torrid times of
pandemic.

Labour productivity is one of the measuring
tools for any steel industry. The same was reduced
during pandemic period and achieved new heights after
the pandemic. The labour productivity achieved in
February ’21 is the highest achieved since inception.
Steel industry is one of the high energy
intensive industry and the same is also effected due to
less production during the period. The following figure
depicts the impact.
The marketing performance was very poor
during the period due to lock down and not much
transportation facilities inside India. Also there was not
much activity which consume steel. Construction
industry was stand still, Automobile industry was
effected and manufacturing industry activities were
stopped due to pandemic. The same can be observed
from the following figure.

Finally, financial performance of the company
has been effected. Net losses were recorded till
November ’20 and due to improvement in market
conditions and production peaking at right time, from
December ’20 onwards company has recorded
continuous net profits till end of the financial year.
VIII. RINL POST COVID
PERFORMANCE
During 2020-21, the sales turnover of RINL
registered a growth of 13% to reach about Rs.18,000 Cr,
the second best since inception. The sales volume
reached 4.45 Mt recording a growth rate of 4 percent. In
March 2021 itself, the Company achieved a sales
turnover of Rs.3,300 crores and sales volume of 7.11
lakh tonnes for the first time in its history. This is 42
percent more than the previous best of Rs.2329 crores in
March 2019.
In 2019-20, the contribution margin of semis
went down to as low as Rs.500/t, while the incremental
cost of Purchased Coke went up to Rs.5, 000/t. Hence,
RINL could not offset lower demand in domestic sales
with export of semis. But, at present the contribution
margin of semis is about Rs.11,500/t and RINL is self-
sufficient in BF Coke, with the commissioning of Coke
Over Battery-5. Hence, RINL able to offset lower
demand in domestic sales with export of semis.
During the year, RINL achieved export sales of
1.3 Mt, which 261% higher than previous year.
On the marketing front, RINL has increased the
sales of High End Value Added Steel as a percentage of
domestic sales from 20% in the year 2019-20 to 25% in
the current year i.e 2020-21. The initiatives taken by
RINL for improving traceability, for OEM registrations
and for VC Meets with customers helped in this
direction.
IX. CONCLUSIONS AND
SUGGESTIONS PAST / POST COVID
ERA
For the time being the survival strategy of all
steel plants is to focus on basics like Cost reduction,
improving utilization and margins, and maintaining cash
flow. China, India, and emerging Southeast Asian
countries such as Vietnam, Indonesia and the Philippines
still have tremendous growth profiles that will drive
demand for steel from infrastructure development and
building construction. We may expect domestic demand
to restart gradually with segments like packaging, steel
products for domestic gas distribution, infrastructure,
special steel for automotive etc. For the next one to two
months, the focus will be on a balance between domestic
and exports. It is believed that overcoming challenges of
getting migrant labourers back into
manufacturing/construction zones, resetting disrupted
supply chains and overcoming liquidity constraints
particularly towards working capital needs, will take
some time. With the monsoons around the corner, it will
impede the industry’s faster return to normalcy.
The New Normal in the post COVID era will
not be the same and every business operation will see a
change, depending on the lessons learnt during the crisis.
Steel Industry which has been Labour intensive, will also
have to look into the ways to improve Health and safety
of workforce and minimizing human touch and
interference through Process automation and
Digitization.
Suggestions for Preparedness to Future Eventualities
Usage of Technology
The term “Industry 4.0” heralds the coming of a
new industrial revolution through smart manufacturing.
Quick Implementation of “Industry 4.0” is the need of
the hour in new normal era.
The Industrial Internet of Things – IIOT is
important because of its potential to enable faster and
better decision-making. The IIoT is to use sensors and
automation to make processes more efficient.

In a post-COVID-19 world, the ultimate goal of these
changes will be to insulate companies and employees
from COVID-19-related risks as much as possible. IIoT
devices can make warehouses and factories operate in a
more remote manner, protecting workers and securing
supply chains. For example, a simple sensor on a forklift
might keep track of location. But a sophisticated sensor
could monitor fuel supply, payload, and maintenance
requirements as well. The COVID-19 pandemic has
expedited the adoption of many digital IIoT
technologies. That is forcing many in industrial settings
especially manufacturing and supply chain management
to adapt quickly.
Market Dynamics
Under these testing times for steel industry,
implementation of Big ticket infrastructure projects as
announced earlier by the Government will help in
improve steel demand. This can become a key driver for
India’s ultimate economic recovery.
India’s domestic steel demand is primarily
driven by Construction & Infrastructure, Capital goods
and Auto & Consumer durables. Construction &
Infrastructure is the largest segment with a share of
around 55%, followed by Automobile @ 17% and
Capital goods @ 9%. Though the Construction sector
accounts for almost 55% of India’s steel consumption,
the per capita use is only around 31 kg compared to an
average of 111 kg of emerging economies. Therefore,
there is huge potential in this segment.
One should concentrate on construction sector
also as it is one of the prime demand drivers for steel.
Supported by government stimulus, recovery in
construction will be led by infrastructure investment
such as railways. Other steel-consuming sectors should
also be placed on the fast track. Government’s initiative
of extending moratorium for the industries will help
improving liquidity. Since the metal industry has strong
forward linkages to many important sectors such as
automotive, construction, infrastructure and
manufacturing, immediate measures to improve these
sectors will drive demand for steel.
The government’s support to rural income, as
well as expected consumption related to the upcoming
festive season, will help a substantial recovery of
demand for consumption-driven manufacturing goods in
the second half.
To enhance demand, measures like time-bound
implementation of infrastructure projects announced by
the government and package for steel consuming
industries like auto and infrastructure, to bring them
back to normalcy at the earliest. The crisis situation will
not only test the strength of our economy but also our
capability to transform within the constraints of time and
resources.
The anticipated increase in urbanization would
provide adequate opportunities to accelerate the steel
demand with India’s housing sector holding substantial
potential. The steel to cement ratio in the country is far
lower at 0.3 against international levels of more than 1
providing adequate scope to improve the steel
consumption.
Constraints
The Covid-19 pandemic has exposed the
vulnerabilities of the metal industry’s raw material
supply chain, where metal producers relied on outside
mining companies for ores to maintain their production
operations at desired levels.
Recent technological developments are
increasingly challenging the dominance of steel,
particularly in Aviation and Auto sectors, with the
current trend preferring light weight material such as
Aluminum and carbon. The Indian steel companies are
therefore faced with the challenge of maintaining the
superiority of steel, which would necessitate
technological upgradation through intensive R&D efforts
for high quality / high strength steel for light weighting.
Positive Out- Look for Steel Industry
Spread of COVID-19 has impacted the
production, demand and supply of steel in the country.
Many steel plants are running at lower capacity. The
steel industry is likely to face huge drop in sales along
with stress on margins. The entities are burdened to
service debts and will not be able to even execute
business plans nor continue any expansion of capacities.
However, India, with its abundant Iron Ore resources,
comparatively lower wage costs, conducive conditions
for a growing market, favourable demographic profile, is
all set to start a new growth curve. It may not come off
immediately, but the fundamental conditions for growth
is in place and will happen.
The Industrial sector is the 2nd largest
consumer in the country after Construction with Capital
goods, Automobiles and Consumer durables being the
majority segments. The National Manufacturing Policy
foresees a share of 25% in GDP over the next decade.
This would be a prominent driver as it has a cascading
effect on related manufacturing industries. India’s Auto
sector offers attractive opportunity as mentioned above
to drive the steel consumption because of its ability to
become a global manufacturing hub for automobiles,
particularly small cars. Though India is the largest
market for small cars, less than 10% of the small car
production is done in India. India can easily aspire to
become a leader in this segment, given its high skill-low
cost labour and favourable geographical location.
Interventions and Initiatives Sought from Government
About 65% of input materials and 50% of the
finished goods of the steel sector are currently moved by
rail. The steel sector contributes about 20% of the total
railway freight which would increase further with
enhancement in the steel production capacities. Road
and rail connectivity along with ports have to be
augmented through appropriate initiatives to facilitate
the capacity build-up. The average payload per wagon in
India is 3-million-ton km per annum against 4.6 in China

and 7.3 in US and needs to be addressed
comprehensively.
Road infrastructure is also vital for the steel
industry, particularly for the medium and small scale
units as well as for distribution of steel products to
remote and rural areas. The transportation in our
country is dominated by the road sector, due to which
the logistics cost in the country as a percentage of GDP
is high compared to the other economies. The National
Highways account for only 1.7% of the total road
network, but carry 40% of the freight. The poor quality
of roads results in low average speeds increasing the
logistics cost. The low road density, particularly in the
mineral-rich States, and inadequate network of roads
connecting mines & steel plants to the national highways
are serious concerns, which need to be addressed
immediately.
The country’s long coast line handles
approximately 61% of the country’s total cargo. The
port capacity needs to be augmented including stacking
space to meet the steel capacity build-up. The port
requirements for import of essential raw materials for the
steel industry would go up by 2025 and accordingly, the
port facilities have to be ramped up. The shipping fleet
in the country is very low and fleet acquisition needs to
be encouraged for self-sufficiency. While the ports
account for 90% of the international freight, coastal
shipping accounts for only 7% of the total domestic
freight, although the country is endowed with a long coal
line of over 7,500 kilo meters. Costal shipping, apart
from being environmental friendly, is a cost effective
mode of transport, given its fuel efficiency. The
developed countries have been taking significant
advantages of coastal shipping and it is time for us to
supplement rail & good transportation through coastal
shipping. In the European Union, the cost of coastal
movement is cheaper than the road and rail movement.
China moves around a billion tons of cargo through
coastal shipping. India, with about 140 vessels, moves
only around 150 million tons through coastal shipping.
Waterways in India are 14,500 km only against 1,10,000
km in China; 50,000 km in Brazil; and 41,000 in in
USA. The Govt. of India has started working on a
comprehensive coastal shipping policy and this should
augur well to enhance coastal shipping in the country,
given its cost advantages.
As the industry keeps growing, it is becoming
difficult to get qualified and skilled manpower. The
crunch is already visible and needs to be addressed
before it assumes proportions. The demographics of the
country is favourable and the highly educated workforce
can be leveraged to the advantage of the industry.
Environmental requirement for “Clean Steel” is
also of great importance today. The development of
energy efficient processes for reduced emissions and
maximization of recycling of wastes have to assume
centre stage for the industry to manage its growth
profitably. The steel industry in future would come
under increased scrutiny from environmental regulators
to limit its carbon footprint and reduce emissions.
Though compliance to the new norms will lead to
increased capital costs, in the long term it will lead to
higher profitability and sustainable growth.
The key to the growth aspiration would be
capital infusion. The industry may require around 75 US
Billion Dollars of fresh capital during the next decade to
create additional capacity. The availability of such a
large investment at a reasonable cost will be a challenge,
particularly as FDI in steel is relatively insignificant.
The Government may have to facilitate this through
innovative policy making.
REFERENCES
[1] 2020 World Steel in Figures, World Steel
Association.
[2] MIS Report on Iron & Steel. (2020 Apr). Joint Plant
Committee, Government of India.
[3] National Steel Policy. (2017). Ministry of steel,
government of India.
[4] Global Steel Industry Overview. (2020 Dec). World
steel association.
[5] Industry Week. (2021). Global auto production
dropped 16% last year thanks to COVID-19.
[6] https://www.industryweek.com/the-economy/data-
and-statistics/article/21159389/global-auto-production-
dropped-16-last-year-thanks-to-covid19.

Impact of COVID 19 on Steel Industry – A case Study of RINL, Visakhapatnam Steel Plant

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