Chennai: Steel demand is expected to decline significantly in 2020-21 in line with a projected contraction in the global economy due to the impact of coronavirus pandemic, Tata Steel has said.
In its annual report, the member of Tata group said most of the steel producing regions are expected to witness a decline in crude steel output due to production cuts amidst ongoing lockdowns.
Tata Steel chairman N Chandrasekaran, terming the slump as the ‘worst contraction’ since the 1930s, said the global economic growth is expected to see a contraction of over three per cent in 2020.
A contraction in the global GDP is not at all a good sign for the global steel sector as steel demand is positively correlated with the economic growth.
“Global GDP growth eased to 2.9 per cent in 2019, against an initial growth projection of 3.5 per cent… As we look ahead, it is important to gauge Covid-19’s unprecedented impact on the global economy. It is expected that global growth will contract by over three per cent in 2020, the worst contraction since the 1930’s,” Chandrasekaran said in the annual report for 2019-20.
Chandrasekaran also said this is for the first time since the Great Depression, that both advanced and developing economies are in recession together.
The impact of the slowing economy was also felt in the global steel sector. Global crude steel production reached 1,870 million tonne (MT) in 2019, registering a more modest growth of 3.4 per cent in 2019 against 4.6 per cent in 2018, he said.
In India also, he said, the growth slowed to 4.2 per cent in FY 2019-20 against an initial growth projection of 7.5 per cent in the beginning of the year. The domestic steel sector registered a stark easing of growth to 1.8 per cent in 2019 compared to 7.7 per cent growth in the previous year.
The country was just beginning to show signs of coming out of a protracted slowdown that began in early 2018 when Covid-19 arrived, Chandrasekaran added.
Tata Steel’s CEO and MD T V Narendran, and executive director and CFO Koushik Chatterjee said FY2020 was undoubtedly a challenging year not just for the company but for most businesses across the globe. Almost all countries faced a slowdown in economic growth amidst rising trade tensions and policy uncertainties.