Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

With the resurgence of COVID-19 infections in India, many steelmakers have diverted oxygen produced and stored for their operations to medical facilities. The government of India has stated the national priority is to save lives. Besides strict COVID-19-related restrictions, the government has banned the use of oxygen for industrial purposes other than in the essential sectors which include steel, petroleum refineries, pharmaceuticals and medical supplies industries.


Most Indian steelmakers are expected to replan their production cycles to suit the current and near-term steel demand and may cut the overall steel output to avoid a supply glut. In states like Maharashtra, Chhattisgarh and Gujarat, the production cuts could be more due to a record rise in infections. Consumption of steel would get impacted amid a slump in demand for autos, construction steel and consumer durable goods.


Around 28 steel plants in India are supplying about 1,500mt of oxygen per day for medical use. Tata Steel is supplying 200-300mt of liquid medical oxygen per day to hospitals assigned by the state government, while JSW Steel is supplying 185mn mt oxygen daily from its Dolvi plant in Maharashtra. AM/NS India is supplying 200mt a day to medical facilities in Gujarat. The state-owned steelmaker Sail has supplied more than 33,000mt of liquid medical oxygen since April 2020 from its five plants in four states — Jharkhand, Chhattisgarh, Odisha and West Bengal. 


Since the beginning of the pandemic, steel plants have supplied over 130,000mt of liquid medical oxygen, which informed India’s steel ministry. Authorities have reserved stock of 30,000mt oxygen, which includes the safety stock for medical use.


In Maharashtra, the state government has diverted 80pc of total oxygen production in the state for medical use with its transpiration allowed without permits and on railways in few instances.  


Demand hits but prices firm

Steel demand could slow gradually if the COVID-19 situation does not ease and the fear of a third wave comes true. The situation, however, is not expected to lead to a sharp drop in prices as seen in 2020. With lessons learnt last year, the industry is a bit more confident of maintaining production and economic activities compared to last year, said a North-based steel maker.


With government support, major infrastructural projects could continue to operate at a normal pace, however, a shortage of casual workers could pose a challenge. Some mill owners, manufacturers and building contractors have announced measures to care for their workers and provide accommodation onsite to avoid disruptions.


Demand from rural areas, where the pandemic is less pronounced, could offer some support to the manufacturing sector and steel producers. 



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