Indian steelmakers opt for maintenance amid sluggish domestic HRC demand: sources

Weak domestic steel demand and a 15% duty on exports since May 22 has driven major Indian steelmakers to choose to idle their plants for maintenance, or consider doing so, industry sources told S&P Global Commodity Insights July 13.

Steel Authority of India Ltd., ArcelorMittal Nippon Steel and JSW Steel were said to have either cut production or planning it due to weak demand, industry sources, including their customers, told S&P Global.

Customers of Tata Steel said that they have not heard of any planned production cuts by the company in July.

All four companies did not respond to e-mail queries by S&P Global.

SAIL did not make any official announcement, although a few officials have hinted at production cuts due to a lack of orders, an eastern India-based source said, adding that he's noted how the company's angle steel output has shrunk to a rate of 3,200 mt/month compared with 5,500 mt/month previously.

A separate northern India distributor said that SAIL has cut production, but the precise quantity was unknown as a producer typically wouldn't announce a figure openly.

Another trader in eastern India said SAIL closed one blast furnace around mid-June in Rourkela, Odisha which is still shut, and there was no clear idea about the quantity of production cut.

Separately, ArcelorMittal Nippon Steel was also heard to have cut output by about 10% by conducting maintenance for three to four days a month.

JSW Steel, one of the top steelmakers in India by volume, has also decided to conduct maintenance in July, three sources said. One of them, a Pune-based distributor, said that they were told by JSW's plant personnel that its Dolvi Steel Works would undergo scheduled annual maintenance for 15-20 days in July.

"They (JSW) have already taken a decision in June that they will go for production cuts to the tune of 200,000 to 250,000 mt/month in July" a western India-based source said.

A second western India-based trader said that maintenance work at JSW is likely to reduce output by 200,000 mt/month at both its Dolvi Steel Works and Vijaynagar Steel Works, adding that the impact of the production cut may not be seen in the near-term.

The mills already have surplus inventory and will try to liquidate that stock first in the market, the second western India-based trader said.

In the domestic market, spot prices of hot-rolled coil surged Rupees 12,200/mt, or 18%, to Rupees 79,000/mt between Feb. 25 when the Russia-Ukraine war broke out, and April 6, when the runup in prices reached a peak, following which prices declined on weak demand, as buyers found prices too expensive.

The Indian government imposed a 15% export duty on finished steel end-May after domestic prices soared in an attempt to curb inflation in the country.

The duty, and weak domestic steel demand, saw hot-rolled coil prices on a delivered Mumbai basis fall Rupees 9,000/mt, or 13%, to Rupees 59,000/mt on July 8, before rebounding to Rupees 59,500/mt July 12 following news that the duty could be removed.

The development came against the background of already softening steel prices due to weakness in demand from key export markets such as Europe and Vietnam, and sluggish sales in the domestic market.