Sarthak Metals Ltd Management Discussions.

The steel industry in general has faced tough times in FY2020. Issues like cheap imports, subdued exports, consolidation of major players, high debt costs in Indian steel industry has led to a weak demand scenario in FY 2020. The crude steel output has reduced by 2.2% in FY 2020, whereas the finished steel production has fallen by more than 25%*. The imported steel in India increased from 6.69 MT to 8.24 MT and increase of 23% which has really hurt the finished steel output. The demand for steel has been supported by domestic demand alone as finished steel exports were low compared to previous fiscals. The per capita consumption of finished steel is almost at 74.1 kgs higher by 7.5% than last year.

Due to pandemic the domestic per capita consumption of steel has taken a hit. The estimated growth in per capita consumption of steel is set to grow only by 2.5% in FY2021.

All major steel plants have had to scale back production schedules. This has been mainly because of the following reasons:

1. Lack of demand of specialised steel from Auto sector & Infrastructre sector.

2. Restricted Manpower for operations.

3. Supply Chain disruptions due to lockdown

Globally, the steel industry is struggling under the impact of the outbreak with key customers like automakers, construction and oil & gas drillers also struggling. Automotive, one of the most important end markets for the steel industry, is seeing sales plunge. Demand of steel from Oil & Gas sector has also taken a major hit due to low demand of oil during the pandemic. Demand for Infrastructure sector also looks bleak due to most expansions looking at delayed implementation or shelving of plans for the near future. The construction sector, mostly housing has some demand recovery in the first quarter of FY21. But most of the sectors have seen a deep decline in the demand for finished steel.

However, surprisingly exports for Indian steel grew by 76% in the first quarter of FY21. The biggest buyer of Indian steel being China accounting for 48% of all steel exports from India. Prices for Chinese steel were considerably higher in the first quarter of FY21 due to post pandemic still being resolved in China, which led to Indias gain.


In this pandemic stricken time opportunities are few and only available to the best in the industry. Since, Sarthak Metals Limited is the market leader in its business, we are seeing preference from the steel makers to stick to established players and avoid any supply side disruptions.

The rural market has been doing well due to sufficient monsoon, availability of labor during harvest season (reverse migration) & excellent support from the Indian government. The excellent monsoon has led to demand in farm equipment, two wheelers, entry segment 4 wheelers and even housing. A U shaped recovery is coming from the rural market, which is boosting the steel demand in the rural India. Such demand of finished steel would your company in selling its staple products necessary in low alloy finished steels.

The on-going trade war between EU, USA and China adds a slew of opportunities for Indian steel as well as Indian raw materials. Exports of steel and various inputs of steel sector are most likely to see an increase. One of the chief reasons for increase in exports is globally Iron Prices are increasing, where as Indian Iron prices are holding steady. Therefore, increasing demand of competitive Indian Steel and thereby increasing demands of the steel inputs in India.


The domestic demand for Indian steel has crashed in the first quarter of FY21 due to the lockdown implemented by the Indian government. Auto sector & Oil sector are in unforeseen low demand scenarios with sales in April for cars at NIL for all the companies. Therefore, domestic demand for HSLA steels is going to take a major hit in FY21 leading to reduced demand for your companys products. Further, due to low demand prices have also seen new lows. Thus, we expect our sales to contract in FY21 even if we see a U shaped recovery in the second half of the year due to lost sales in the first 2 quarters of the fiscal.

The main threat to the Indian steel industry is still from the cheap steel imports which the Chinese companies are dumping in India. The current demand for Indian steel for Chinese infrastructure is projected to be short-lived, as Chinese steel giants will soon fulfill the gap as their plants come to full production and recover from supply chain disruptions. The safeguards to protect Indian steel will be tested to the limits in these times.

The consolidation from IBC has led to an Oligopolistic market in India with entire steel sector coming into the hands of the few. The purchasers have mostly been integrated for the acquired plants and purchases are now being done centrally. Our brand name and product reliability has helped us garner orders and command premium as compared to our competitors in the first quarter. However, due to the long term consolidated buying strategy demand for spot orders with higher premium have reduced considerably.

The prices for Aluminum scrap have remained mostly sticky and at par with pre-pandemic levels. However, the finished goods prices falling to record low. Demand for Aluminum remains weak due to low consumption and contraction of manufacturing sector production. We expect the gross margins in Aluminum to remain low this year. *

*Source (Indian Steel Industry Reports]