New Delhi: As the pandemic and the lockdown severely impacted construction and allied activities, a majority of the steel manufacturers believe demand in the sector will start to recover in the third quarter of financial year 2020-21, as per a survey by Crisil Research.
Nearly 60 per cent of the respondents expect demand to recover from the third quarter, as infrastructure and construction activities gather pace, migrant workers return to work, and the fiscal measures taken by the government improve availability of funds, a Crisil statement said.
Further, around 80 per cent of the respondents feel pent-up demand from awarded or ongoing infrastructure projects, especially roads and railways, will drive recovery, especially for long steel, and galvanised products.
The survey also revealed that even with an anticipated slowdown in national highway construction, roads are expected to remain the frontrunner, while minimal pickup is expected in real estate activity in the near term.
About 33 per cent of the respondents estimate that utilisation of steel will be 50-60 per cent in fiscal 2021, while another 33 per cent, including key integrated steel producers, see it at 60-70 per cent. On aggregate, the respondents expect utilisation to be 66-68 per cent.
Key constraints pointed out by the respondents include demand slowdown, logistic constraints and labour shortage. Dearth of truckers and lack of labourers for loading/unloading and movement of goods will impede transportation of raw material and finished goods, it said.
Despite ports and mining activities being functional during the lockdown, 45 per cent of the steelmakers had seen disruptions in raw material supply. Iron ore availability was the most impacted as indicated by 45 per cent of the respondents and the coking coal supply was the next to be impacted.
However, most respondents believe this to be more of a transportation and supply issue rather than one of lack of availability and mining.