After relaxation in lockdown guidelines it seems the steel sector is going through an upswing phase, what is your current take on the steel sector? How will be demand offtake in the remaining quarter of the current financial year?
With the initial lockdown and assumptions of slowdown, we expected Q2FY21 to see a demand decline of 20% on year. However, the upswing from automobile and government supported construction lead to a sharp recovery with demand contraction was only 7-10% in the second quarter. Further, exports have been very strong in the first half for the larger companies on back of demand for semis from China. Going forward, we expect growth momentum from auto and infrastructure to continue and the fiscal to close at 13-14% decline.
What is your assessment for the next financial year 2021-22 for the steel sector? Where will the maximum demand for the industry come from?
We expect strong growth of 10-15% in fiscal 2022 on low base of fiscal 2021 supported by demand from infrastructure, automobile and consumer durables.
Production and consumption of steel are widely regarded as an indicator of economic progress. The progress of the steel sector depends on government policies and projects. How can the government hand-hold the industry to propel the sector?
While the primary players are back on their feet and reporting best ever monthly production and sales, the secondary players which contributed to 45% of the overall demand till last year are still struggling due to raw material availability. Continued focus on both central and state government in implementing infrastructure and real estate projects in a timely manner is critical for continued growth momentum.
The steel industry is going through a consolidation phase. How beneficial is this for the growth of the steel sector?
A lot of large capacities like Essar Steel, Bhushan Steel, Electrosteel were operating at sub-optimal volumes. However, post acquisitions some of them have seen a turnaround with improved utilization, profitability and cash flows.
Though Indian steel industry has shown tremendous progress, the latest being JSPL’s contribution in manufacturing world-class rails for high-speed trains including bullet trains, it still has a long way to go to flood the world market. Your take on this.
Indian companies are not limiting their supply to the neighbouring countries with integrated steel players exporting to EU, Middle East, South East Asia, etc. Also, China has served as a key export market during H1 fiscal 2021 accounting for 29% of India's finished steel exports. Impetus on Atmanirbhar Bharat is definitely a step in right direction towards the ultimate target of becoming a global supplier but, increasing contribution of value added steel in exports will be an important factor too.
What are the challenges faced by the industry?
Presently two major challenges being highlighted by key industry participants include shortage of high grade iron ore and high logistics cost. While the iron ore shortage which is a temporary glitch and will be soon resolved with improved production and commencement of supply form newly auctioned mines, reducing logistics cost to improve the overall profitability of the sector would need dedicated efforts from the government. As discussed on various platforms, India needs to reduce its overall share of logistics cost from current levels of 15% to global average of 8-9%.
How receptive is the Indian steel sector to Digitization, IoT, Robotic process automation (RPA), Automation, Artificial Intelligence, data analytics? Has the industry benefited by adopting these technologies?
Lack of digitization plagues the steel sector and has been aggravated because of the pandemic. Currently digitization is limited to ISPs and lacking for most of the secondary players. Steel manufacturers are required to focus their internal culture to build a digital analytics-ready workforce, thereby, boosting the competitive position in the global steel market.
How does the remedial ‘anti-dumping duty’ imposed by the government for cheap import of steel benefits / affects India steel sector in the long run?
Anti-dumping duty avoids the threat of imports for the industry and assures strong volumesin domestic market. Further, it supports the realisations supporting profitability and cash flows.
