Steel Industry

Navigating Through The Crisis

Metals have been one of the core drivers of economic growth & consequently economic development specially since the 18th century. Among metals, steel has historically held a dominant position. As a raw material % intermediate product, production & consumption of steel are widely regarded as indicators of economic progress. Steel industry has always been at the forefront of industrial development & forms the backbone of any economy. But this ​industry has not always been at ease. This industry had gone through the crisis period post Global financial crisis of 2008-09 & the recent catastrophe of Covid -19 pandemic.

Post GFC

With the collapse of “too big to fail “ financial conglomerate the Lehman Brothers , sent ripples of financial shock across the world with India being no exception. It set in motion a series of chain reaction that brought down global economy on its knees. Millions of transactions came to halt. The entire system froze up. It would not be an exaggeration to say that the situation was no less than the cardiac arrest of global financial system. The housing bubble in U.S. that was in making burst turning the entire new system of “Securitization Food Chain” upside down. This system that once created millions of dollars of mortgage loans and combined with other loans called Collateralized Debt Obligations (CDOs) then sold to investors across the world left them with losses. With U.S. consumers cutting back their spending the demand for global goods fell. As recession accelerate and spread globally there were massive layoff and foreclosures. India ,China sees sales plummet and as always poor workers end up paying the highest price by losing their jobs. Singapore, which was growing remarkably at 20% saw their numbers turning negative to -9% in the last quarter of 2009. With demand slowing down resulted in downward pressure on prices across commodities. The manufacturing sector was worst hit consequently the global steel demand turned negative to – 6.2 precent in 2008 -09. The response to this crisis was admirably rapid but there was overshooting of stimulus , both monetary and fiscal whichsowed the seeds for inflation. The Indian steel industry through this support faired till 2010 but since then witnessed rapid deceleration of growth. The global steel prices fell resulting in these companies’ making losses and banks accumulated large NPAs. This deceleration continued till 2015 but still the sector was struggling till 2017.

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