Several Indian private steel mills are planning to cut back production through various alternatives starting next month in the wake of falling domestic demand and the recently levied 15 percent export tax making overseas sales unviable, SteelOrbis learned from industry officials in Wednesday, June 29.
One of the options to reduce output being considered by some mills is to bring forward annual maintenance shutdowns. Officials said that usually mills undertook maintenance shutdowns in the range of 15-25 days during the September-October period, but, with domestic steel prices down 15 percent over the last one month and amid rising inventories, some mills will go ahead with annual maintenance from July onwards.
Another option that will be adopted by other steel mills will be to resort to attempts to reduce output several times a month at intervals of every three to five days, to limit the pace of inventory build-up, officials said.
“It does not make sense in continuing production and accumulating inventory and locking up working capital,” JSW Steel Limited’s joint managing director Seshagiri Rao said in a statement.
Industry sources estimate that average domestic monthly steel output is around 10 million mt, which was down to 6 million mt in May, and mills are still seeing a rise in inventory, indicating sluggish local demand. To make matters worse, steel exports during May were estimated at 750,000 mt, against 1.24 million mt in May 2021, and this was largely before the imposition of the export tax, and the fall in exports in June will be sharper, officials said.