Jindal Steel & Power Ltd is churning out more of the alloy for exports as the deadly coronavirus curtails steelmaking in Europe, even as it warned of looming financial difficulties from a prolonged shutdown in India.
Many electric arc furnaces in Europe are unable to run amid virus-related restrictions that have limited the workforce and hit the collection of ferrous scrap, a key input for the mills, according to managing director VR Sharma.
That supply squeeze has led to a sharp rise in the spot prices of billets and other products in the last few days, he said.
“Now, day and night, we are booking only for exports,” Sharma said in an interview, adding the company’s usual production ratio of 30% for exports and 70% for domestic orders has reversed in the past weeks.
As countries across the world set in place lockdowns to curb the spread of the coronavirus amid mounting fatalities, economic activity has suffered.
Several steel mills in the US, Europe and parts of Asia have reduced production, including ArcelorMittal, which said it’s cutting output at key European operations.
In India, Prime Minister Narendra Modi imposed a three-week nationwide lockdown, starting March 25.
While the lockdown isn’t mandatory for India’s steel industry, Wood Mackenzie expects mills to slash output by 19% this quarter from a year earlier as demand remains weak and because of obstructions to the supply chain.
Saddled with debt of Rs340bn ($4.5bn), the New Delhi-based mill expects to repay Rs50bn every year, a plan that maybe in jeopardy if the government extends the lockdown, Sharma said.
“We are pretty safe till the end of the month in terms of meeting out our obligations and also day-to-day expenses because we have a good amount of orders,” he said. “If it continues till May 31 or mid of June, then it is a problem.”
The Naveen Jindal-led company is seeing demand for steel plates, billets, slabs and pellets mainly from Europe, Saudi Arabia, Abu Dhabi and Bahrain, he said. “Plates is a big business” as stockists in Europe need the material because the restrictions may ease in half a month and many mills in the region that have shut may take time to resume work, Sharma said.
Jindal Steel, which is running its crude steel plants at normal capacity, expects to produce 10mn tonnes of steel in the year started April 1, a jump from 8.17mn tonnes last year, Sharma said.
It will start loading supplies for domestic orders from next week, when the lockdown ends.
The company said that, while it isn’t facing problems at the two ports it mainly uses, Paradip and Gopalpur, labour shortages are becoming an issue.
“Within the states of Odisha and Chhattisgarh there is no problem with logistics but truck drivers are facing problems at the destination because they are unable to unload the goods due to labour shortage,” Sharma said.