Indian mills seek loan help as lockdown extended

India's steel market participants are requesting for loan payment delays as the country again extended its lockdown, adding to losses with most steel capacity off line.

Major steelmakers including JSW Steel and Jindal Steel and Power have applied for a moratorium on loan repayments from their lenders, under the Reserve Bank of India's guidelines issued last week to lending institutions to offer a three-month moratorium for borrowers to defer payments from 1 March to 31 May.

India late last week extended its Covid-19 lockdown to 17 May in at least 130 areas or so-called red zones with a high incidence of cases, including major urban areas such as Mumbai and Delhi and the automobile manufacturing hub of Pune. Trains, planes and buses carrying passengers will continue to be prohibited. Most steel demand is in the areas hit by the virus, so eased restrictions in other areas may have limited impact on steel demand.

Supply chain restrictions are adding to losses faced by traders. "Payments are pending for more than 70 days now, and buyers are unwilling to pay interest on these delayed sums," a Chennai trader said.

"We have started operations and are also receiving orders but we are restricted to working with limited staff," a sales executive with NLMK India said. NLMK's Mumbai-based facility usually ships 4,000t per month, but it is likely to only ship around 1,500t in May.

Major steelmakers including JSW Steel, Tata Steel and Sail have only been able to operate at about 30-50pc of capacity since the nationwide lockdown began on 25 March. Combined with AMNS India and JPSL output, the five steelmakers produced 65mn t of crude steel in the year to 31 March, more than half of the country's total output of 109.21mn t in the year to 31 March. The lockdown has halted the country's smaller electric arc and induction furnaces that account for about half of crude steel output.

JSW Steel today said its April crude steel output fell by 59.5pc to 563,000t from a year earlier, with capacity utilisation at around 38pc.

The ongoing spread of Covid-19 and any further lockdown extensions will likely keep steel demand weak in the coming months, and mills may need a second round of loan deferrals after June, a Mumbai-based analyst told Argus.

India's Federation of Indian Chambers of Commerce (FICCI) has appealed to the government to grant an additional three-month moratorium on loan repayments for small and medium-sized manufacturers and interest free financing to revive these units. FICCI recommends that the entire supply chain sector including integrated steel producers, secondary steel makers, pipes and tube producers, fabricators, downstream and servicing units, and steel retail markets be categorised as an "essential service" and allowed to function. Pipe and tube producers that use 30pc of India's crude steel have been shut during the lockdown.

The June-September monsoon season will further restrict construction activities that account for 60pc of India's steel consumption. Migrant workers that rushed back to hometowns in the wake of Covid-19 are not expected to return to work sites, as they typically engage in farming activities during the monsoon.

By Charlotte Rao