Oxygen diversion spares Indian steel, but lockdown threatens

The diversion of oxygen away from industry to medical purposes due to ballooning Covid-19 cases and oxygen shortages in India is unlikely to have a significant impact on steel production in the country, local sources tell Kallanish.

On Friday India recorded 332,730 coronavirus cases, the highest one-day tally anywhere in the world for the second day in a row, with most hospitals full and running out of oxygen. The second wave of the pandemic is raising fears among steel industry participants that India could implement another nationwide lockdown that would see demand curtailed as it was last spring.

Around 25-30% of oxygen produced for steel plants is in liquid form, which is the maximum that can be diverted for medical purposes, says Sachin Shetty of consultancy Quesrow Consulting.

“Current medical oxygen (MO) capacity is about 7,500 tonnes and this is being ramped up to about 9,000 t/day,” he observes. “Regular MO demand is about 700-900 t/d, which has now gone up to around 6,000 t/day. That’s why there was a sudden shortage and steel plants were asked to meet the shortfall. Hopefully with commercial MO operators improving oxygen capacities, steel mills could use this oxygen for their captive use.”

“However, the worry is the pace of infections. If these Covid-19 cases continue and if we have to go on complete lockdown like in the last case, the impact could be severe on steel production and the production loss could be as high as 20-30% this time.”

An Indian Steel Association representative says: “The diversion of oxygen from steel plants will have minimal effect on steel production per se. Lockdown is the real worry but it is unlikely. The focus is more on local restrictions rather than a countrywide lockdown. Hence, we are not expecting production to take a hit. Demand will falter in the short term but even out in the middle term. So, production is expected to remain normal.”

Indian finished steel consumption slumped 55% on-year in the June-2020 quarter, although it recovered to a 10% on-year decline in the first 11 months of the fiscal year through March 2021. Production slumped 42%, recovering to an 8% drop on the same basis. Indian mills offset the June-2020 quarter local demand slump by hiking exports by 145%.

Adam Smith Germany