India’s biggest steelmaker expects disruption from the country’s brutal second wave of coronavirus to last until September as it slashed production because of oxygen shortages and shrinking industrial demand.
JSW is also struggling to vaccinate its staff, contract workers and their families, together about 1m people, as the country tries to overcome a shortage of jabs.
The company, which is India’s largest steel producer by market capitalisation at Rs1.8tn ($24.5bn), has cut steel output almost 10 per cent, JSW’s billionaire chair Sajjan Jindal told the Financial Times.
Crippling shortages of oxygen for Covid-19 patients has forced industrial groups to redirect the gas from factories to hospitals.
JSW’s production cuts highlighted how India’s second wave has upset what was otherwise expected to be a boom time for industry.
The economy and consumer demand were expected to roar back after a contraction owing to coronavirus last year, while steelmakers were riding on a strong outlook for the global market.
Corporate India has been forced to juggle oxygen and vaccine shortages, tumbling demand and infections among employees. Other companies, including the largest carmaker Maruti Suzuki, have cut output and temporarily closed factories.
“I never had imagined that there could be a second wave which could be so violent and so devastating,” said Jindal, one of India’s most powerful tycoons. “We’re clearly seeing that impact [on domestic demand] coming to our company . . . I see some disruption until September.”
India reported more than 400,000 Covid-19 infections and 4,000 deaths on Saturday, though experts believe the true toll was far higher.
Investors have remained bullish about JSW, whose share price has risen 90 per cent since the start of this year, thanks to a strong global steel market.
Jindal said JSW could compensate for weaker domestic demand through exports, which accounted for about a fifth of revenues. “The global steel cycle has turned north and JSW finds itself in a good position,” said Saurabh Mukherjea, founder of Marcellus Investment Managers.
But at home, the picture remained complicated because of the deteriorating business outlook and the burden the pandemic has placed on companies and their employees.
JSW is now the largest supplier of liquid medical oxygen in the country, according to Jindal, transporting about 1,200 tonnes a day. He said he expected that to continue for “a couple of months”.
The company also faced challenges caring for its employees and their relatives.
A policy change this month allowed companies to try to vaccinate workers through tie-ups with private hospitals, but JSW — as with many others — has been unable to procure jabs due to a severe vaccine shortage that is expected to continue until at least July.
He said about 20-30 employees tested positive for Covid-19 every day at the company’s main plant at Ballari in southern India.
“We as a country faltered on vaccination,” Jindal said. “We had the capacity. Somehow, I don’t know, we did not give it that much importance.”
He said authorities could have better prepared the country for the second wave, though he argued that no one had anticipated how severe it would be.
“We certainly messed up in the planning for this wave,” he said. “Otherwise we wouldn’t have had the elections, we would not have had the Kumbh,” a reference to local polls and a huge religious gathering that took place while cases were surging.
“We would have been much more careful about it. We lost a lot of lives and continue to lose a lot of lives.”