Recently, Tata Sons’ chairman N. Chandrasekaran stated that the global economy in the current year of 2020 is expected to witness a contraction of over 3%. According to Chandrasekaran, this slump would be the worst contraction since the 1930s and since the Great Depression, this is the first time that the developing countries and advanced countries are facing a recession together.
Tata Steel in their recent annual report for 2019-20 stated that as a result of the global coronavirus pandemic the year 2020-21 is expected to see a significant decline in the demand for steel in line with an estimated contraction in the global economy. A shrink in the global GDP stands as a red flag for the global steel sector since the steel demand is related to economic growth.
Chandrasekaran in the annual report stated: “global GDP growth eased to 2.9 percent in 2019, against an initial growth projection of 3.5 percent… As we look ahead, it is important to gauge COVID-19’s unprecedented impact on the global economy. It is expected that global growth will contract by over three percent in 2020, the worst contraction since the 1930’s”.
The outbreak of COVID-19 in early 2020 had worsened the already slowed down the growth of the global economy. Economic activity across the globe was near to a standstill because of the nationwide lockdowns and other that were implemented by many countries as a preventive measure against the transmission of the virus.
As per the report presented by Tata, the pandemic has affected industries and economies across the globe and the steel sector is no exception to these adverse effects.
Due to the production cuts that are doing the rounds amid COVID-19, most of the regions that produce steel are expected to see a decline in the steel output. However, since China was the first country to come out of the pandemic, its economy is expected to normalize faster as compared to other countries.
As per the report, the steel prices in India are expected to go down considering the oversupply of steel with a muted demand in the market. Considering that India is largely dependent on migrant laborers restarting the infrastructure and construction sector is highly challenging in the near future.
The annual report stated: “Although the manufacturing sector is expected to stage a relatively quick recovery, supply chain disruptions are likely to continue. The key steel-consuming sectors will continue to be sluggish”.
Hope you enjoy the article “GLOBAL ECONOMY TO SEE A WORSE CONTRACTION?” stay tuned for more updates.