Even as steelmakers anticipate a recovery in demand for steel in the next couple of months, mixed messages are coming through for the sector.
MUMBAI: Even as steelmakers anticipate a recovery in demand for steel in the next couple of months, mixed messages are coming through for the sector. JSW Steel and Bhushan Steel, the two big players in the galvanised steel market, have two different stories to tell as far as demand is concerned.
Requesting anonymity, an official at the Delhi-based Bhushan Steel Ltd said the company’s plants will continue to run at 30% less capacity for some more time as the demand for its flagship product, galvanised steel, hasn’t picked up. The steelmaker produces 1 million tonne of galvanised steel per annum at its Khopoli and Sahibabad works. It had announced a production cut on October 27.
However, JSW Steel’s galvanised steel units at Tarapur and Vasind in Maharashtra have resumed production. The company has an installed capacity of 0.9 million tonne per annum for galvanised, colour-coated cold-rolled products. A JSW Steel official told DNA Money that it is already “over-booked” with orders. Galvanised steel is used in the automobile and home appliances industries. A slump in demand for passenger as well as commercial vehicles had forced the two steelmakers to cut production. The magnitude of cut by JSW Steel at its Vasind and Tarapur plants is unknown but sources said it was significant. The company spokesperson was unavailable for comment.
But Bhushan Steel is seeing no such revival in demand. A company official, requesting anonymity, said the demand situation hasn’t improved at all. “The 30% capacity cut remains and production depends on the orders being placed. The demand for galvanised steel is still very low,” he said. The official added that Bhushan Steel isn’t looking at ramping up production at the moment.
Galvanised steel accounts for 25% of Bhushan Steel’s sales. Its major auto clients include Mahindra & Mahindra, Tata Motors and Ashok Leyland. With these automakers adjusting production of vehicles, Bhushan Steel may take some more time to reach optimum capacity, feel analysts.
An analyst with a research firm, on condition of anonymity, said, “With one-fourth of its sales coming from domestic auto sector, Bhushan Steel will have a tough time ahead as demand for auto is not showing any signs of improvement.”
The analyst, however, added that JSW Steel is a major exporter of galvanised steel and that could be why its plants are running at full capacity. “There might be some demand coming from abroad as JSW Steel’s products are preferred by automakers,” he said.
Giving the example of Tata Steel, the analyst said the Tata company managed to weather the storm as its products are respected for their quality. The same holds true for JSW Steel.
Earlier, Neeraj Singhal, the managing director of Bhushan Steel, had said that the company’s plants will resume optimum production by the middle of December as demand was expected to pick up then. On October 10, the company stopped buying raw material for production as inventories had piled up. The spokesperson was unavailable for comment.
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