Corona would go; we won’t

0
70

“Tough times don’t last, tough people do”

By Deepak Goyal, CFO, APL Apollo

There is no denying the fact that the whole world is currently passing through an unprecedented crisis due to the widespread outbreak of coronavirus. Never before we had witnessed a pandemic of such magnitude which has ravaged the industries and economies all around the globe in one go. The ongoing crisis has resulted into production losses to the extent of recession gradually culminating into job losses, wage cuts and retrenchments. The crisis is deepening further and nobody knows how graver the situation will become and how long this all will continue.

Amid this entire crisis situation, China, the originating country of the pandemic, gives us a glimmer of hope with Wuhan, the epicentre of the pandemic limping back to normalcy. But, the picture is quite opposite in rest of the world where the number of coronavirus infected people is growing exponentially with each passing day. Be it developed, underdeveloped or developing country, everywhere casualties due to coronavirus are on the rise. Even the heads of different countries had to be quarantined, for example the British prime minister had to be admitted to ICU. The situation continues to be grim and lockdown has been imposed in almost every country. Still there seems to be no respite in sight due to unavailability of any vaccine as of now!

Anticipating the magnitude of the problem, the Central government as well as the state governments have already taken several pre-emptive steps to curtail the spread of the virus. For this purpose, initially a three week lockdown was imposed in the country, now the lockdown is being further extended. Several states have extended their lockdown period to another 15 days.

Amid all this chaos, trade and business have already taken a back seat; and the world economy is heading towards a recession. According to the International Monetary Fund (IMF), the world economy is already suffering its worst recession since the Great Depression of 1930. With emerging markets and low-income nations in Asia, Africa and Latin America in particular at high risk, the present gigantic crisis has bought jeopardised the world economy.

In India, retail, transport, hospitality, travel and tourism industries have been the worst hit along with small and medium-sized industries, and self-employed persons. Steel though falls within the category of essential commodities, the states imposed various restrictions on the operation of steel plants, besides entry-exit of the workers and movement of various raw materials. Thankfully, the Steel Secretary Binoy Kumar immediately intervened and wrote to the states to allow operations of integrated steel plants as well as induction furnace or electric arc furnace based steel units. He also requested the states to allow the movement of raw materials and finished products through rail, road as well as through waterways or sea routes.

 

Even then, integrated produce of steel had to resort to curtailing production and run their units with the bare minimum workforce. Even the PSU SAIL also pruned production by half to prevent piling up of the inventory further. On the global level as well, the world’s largest steelmaker Arcelor Mittal, which operates in 60 countries with a capacity of 90 million tonnes per annum, also reduced its production simultaneously with temporarily idling steel making and finishing assets.

 

We, at APL Apollo, had also temporarily closed all our operations and manufacturing units across locations after the lockdown was announced. As a responsible corporate, we abided by all the instructions given to us to save our employees, stakeholders and the society at large from getting infected with the deadly virus. Even as we lost 8-10 days in March, our sales were down by just 4% during January-March quarter and overall, we had a whopping 23% rise in sales in 2019-20 over the previous fiscal.

 

The question is whether such growth momentum could be maintained in future as well? The answer depends on two factors – a) the havoc the virus will cause on the economy and public health and b) the government’s response towards bringing back the trajectory of high growth. We have every reason to believe that the government would respond with all its might to get the economy back on track. The Rs 1.7 lakh crore package announced by the Finance Minister Nirmala Sitharaman, followed by tax moratorium and moratorium on the payment of interest, is the proof of the government’s firm determination to pull back every section of the country from the jaws of corona crisis.

 

A lot more is expected to be unfolded soon. With a focus on reviving demand, resumption of stalled infrastructure and construction projects should top the chart, as any investment on infrastructure projects has positive effects on other industries, thus helping in the revival of the economy.

 

In such a scenario, APL Apollo stands to gain the most. We are the leading structural steel company in the country. Structural steel is durable, sustainable, fire-resistant, and easy-to-repair. India has started using the material, of late, vigorously; but the quantity is far less than what it should have been. However, it is only a matter of time for the usage to grow rapidly as structural steel saves time and money. Structural products’ aesthetic property and complete recyclability also allow for improved environmental performance across the life-cycle of the structure.

Globally, the residential sector accounts for around 40% of the total structural steel consumption, followed by infrastructure, commercial sectors and others including public utility. Of the various types of steel used in the infrastructure and construction sectors, growth potential is the highest for structural steel in India.

It is true that steel’s usage in is at its nascent stage in the country – just 4.4% of the total consumption, compared with the global average of 9% and 11% in Europe and 8% in Japan and the Middle East. The share is projected to go up to 10% of the total consumption in 2023 and even higher in 2030. It’s cheaper hence its demand will always be there which will further grow by leaps and bounds.

 

Finally, any optimistic projections may not gel with the widely prevailing sombre mood in the wake of COVID-19 crisis. But, even in this grim scenario, if anything is true that is the law of nature: the Sun comes out even after the darkest night. We will overcome this phase and emerge even stronger than ever.