Comment on the stainless steel sector's current scenario and policy favours from the Governing arm?
Indian stainless steel market is the second-largest with a production capacity of 3.17 MT (CY2020) after China. As per the Indian Stainless Steel Development Association (ISSDA), India witnessed an 8-9% CAGR in demand over the last four decades. The per capita consumption of stainless steel in India has seen a significant growth in a span of eight years and now stands at ~2.5 kg. However, this is much lower than the world average of ~6 kg.India has a melt capacity to produce 5 million tonnes (MT) of stainless steel annually, out of which ~⅓ capacity is in the MSME segment.
With an adequate installed capacity, the domestic industry is equipped to meet the stainless steel demand in the country. It is capable of producing all major grades including 200, 300, and 400 series, as well as duplex and specialized stainless steel approved by Bureau of Indian Standards (BIS) and various international standards. These products are used for a wide range of applications like ART (Automobile, Railways & Transport), Process Industries (nuclear power, oil & gas industries, pharma, energy, petrochemical), ABC (Architecture, Building & Construction), Households (white goods, utensils, etc.), Razor Blade, Coin Blanks, etc. They also havewide usage in segments like medical &healthcare, defence, and aerospace. No country is possibly producing more stainless steel grades or variants than India; the nation is already ‘Atmanirbhar’ in terms of stainless steel making. The Indian industry has also planned capacity expansion to meet the growing domestic demand and serve export markets.
However, the domestic industry is burdened with certain issues. Out of the total installed capacity in the country, the gross capacity utilization is just about 60%. This is due to significantly subsidized and dumped imports from FTA countries and China. Moreover, huge capacity additions in Indonesia via Chinese investments in the past 2-3 years have further changed the trading dynamics in the world. Both, Indonesia and China are known to provide non-WTO compliant subsidies to their manufacturers. This is in addition to the fact that the Indian producers face high costs of capital and logistics as compared to other competing nations.
After the suspension of Countervailing Duty (CVD) on Chinese stainless steel products and revocation of the provisional CVD on Indonesia in the latest Union Budget, the domestic industry is expecting a significant rise in imports during the current FY. It is estimated that unfairly priced imports from Indonesia and China are likely to distort the domestic market, especially affecting MSME manufacturers. The domestic stainless steel industry has urged the Indian government for realizing a level-playing field, at par with global producers.
Despite these challenges, the growth prospects of the domestic stainless steel industry are bright. Stainless steel consumption is directly related to a country’s GDP growth. As per the latest RBI report, GDP growth in FY22 is expected to be 9.5%. This indicates that the Indian economic growth will be comparatively higher than other economies. Additionally, flagship programs by the Indian government - Make in India and Aatmanirbhar Bharat- are providing impetus to the domestic industry as the economy recovers after the second wave of the pandemic. The much-needed government support will improve the financial profitability of domestic producers, which will attract investment within the country and drive the economy in the form of more jobs.
In the past few quarters the company has performed well despite the Pandemic. How did you manage to steer the company towards growth and profitability?
The first wave of the pandemic taught us to keep our business agile and responsive in order to adapt quickly to sudden changes in the market. Consequentially, we optimized our production and supply chain to ensure that the demand is fulfilled at all times, even in the case of a sudden upsurge in Covid cases. We also focused on upping sales in the export markets when there was weak demand in the domestic market. We aligned our manufacturing as per improved demand in various segments. This enabled us to keep the business from downward spiraling, while the economy recovered gradually. Securing the internal environment, and the health and safety of employees was equally necessary in order to successfully tackle the catalytic spread of the virus and maintain smooth operations. Hence, we implemented work from home/staggered shifts and other mechanisms to continue production with a lesser workforce. We shifted to a strategy of multi-skilling of operating posts so that employees could fill-in for each other when required. Besides, we got all the employees and their families vaccinated.
Please share with us a few of the initiatives you have taken to provide relief to the Covid affected areas?
Since the onset of the pandemic in 2020, Jindal Stainless has been consistently supplying over 50 metric tonnes (MT) Liquid Medical Oxygen (LMO) per day through its Hisar and Jajpur facilities to meet the increasing demand for liquid oxygen in Delhi-NCR, Haryana, Odisha, Andhra Pradesh, and other states. We efficiently increased our production and supply of LMO to Covid-affected patients across the length and breadth of the country during the second wave of the pandemic. Over and above this, oxygen was directed to oxygen gas cylinder fillers as per government directives. Over 6,000 MT LMO has been dispatched by the Company so far. Jindal Stainless also converted the OP Jindal Modern School in Hisar into an emergency Covid hospital. This 500-bed Covid hospital, equipped with oxygen supplied by the Company, was completed in a record time of two weeks. Apart from this, the Company facilitated supply of 150 ventilators to the state governments of Haryana and Odisha.
To offer moral and physical support to infected employees and family members, Jindal Stainless formed a Covid task force. The Company also announced a policy to extend all-round support to immediate family members of all employees who lost their lives to the pandemic. As of today, Jindal Stainless is supporting inoculation drives for over 35,000 employees and their families across various locations.
Which are the key projects to look forward/ Future potential/ Opportunities in India as against overseas and vice-versa?
As mentioned before, the Indian economy is expected to grow by 9.5% in FY 21-22 as per RBI’s latest projection. Unlocking of the Indian market is also in progress after the second wave and an enhanced mass vaccination drive is expected to instill further confidence in the industry. Demand is expected to be healthy due to public and private spending on infrastructure, a burgeoning focus on sustainable infrastructure, and the government’s stimulus for supporting the MSME ecosystem. Other traditional segments are also expected to recover well. Kitchen goods and white goods have been the primary drivers of stainless steel consumption in India, amounting to nearly 40% of the total demand. However, lately, Architecture, Building, and Construction (ABC) and Automobiles, Railway and Transport (ART) have also become major stainless steel consuming segments. In addition to these, segments like process industries, nuclear energy, and oil and gas are upping their stainless steel usage. Indian Railways drives a major share of the domestic stainless steel demand originating from railway wagons and coaches, railway infrastructure like foot-over-bridges, station modernization, and dedicated freight corridors. Additionally, metro projects in India continue to extensively use stainless steel in various applications. Usage of stainless steel in the automobile sector is also increasing due to the recently introduced BSVI (Bharat Stage VI) norms.
The upcoming merger of the two group companies, namely, Jindal Stainless (Hisar) into Jindal Stainless (JSL), will create a mega stainless steel entity that will be among the top 10 stainless steel companies in the world and the largest stainless steel company in India. The consolidation of businesses will recast the merged entity as an integrated, modern and ‘state-of-the-art’ manufacturing facility, bringing diversified technology, talent and R&D under one roof. This will further enhance our customer base and production efficiency.
As mentioned earlier, the per capita consumption of stainless steel in India, at ~2.5 kg, lags behind the global average of ~6 kg. This underlines the ample potential for the growth of stainless steel applications across sectors in the country. Although, for this reason, India has also become a hotspot for subsidized imports from countries with excess produce. Nevertheless, the domestic industry is equipped to compete with the international producers in all major stainless steel grades (200, 300, 400, and duplex).
Technological transformations and trends driving momentum
The introduction of technology in steel making set-up is changing the face of traditional manufacturing. Jindal Stainless embarked on a digital transformation journey by implementing cutting-edge technology solutions in the manufacturing industry. Information Technology has been instrumental in enabling smoother, faster, and transparent processes across multiple divisions of Jindal Stainless’ major operations and activities. In the metal manufacturing segment, Jindal Stainless was a forerunner in digital transformation when we overhauled our ERP applications and migrated to the SAP HANA database on Cloud in 2017. It enabled business transactions and reports to be 10 to 15 times faster. Later in 2019, we were the first ones to implement BW/4HANA, one of the world’s fastest data warehousing and reporting systems. This was followed by digitization of several processes like paperless RFQ floating system, digitization of manual inventory operations, PO tracking, vehicle loading process, TAT calculation, and freight bill processing. We adopted the best industry-specific e-commerce practices by on-boarding Hybris Commerce, starting with the roll-out of an e-Auction platform. Our customers now have a 360˚ view, accessing relevant information in the form of reports and dashboards covering every aspect of their interaction with us. Moreover, vehicle tracking has made the process even more transparent for our customers. Online order placement for our high-selling-SKUs and online payments have also been rolled-out. Our pre-sales product, C4C, has been tightly integrated with Hybris Commerce to provide expeditious service and an Assisted Service Module has been activated to aid the Customer Support Team in efficiently addressing the queries of the customers. Going forward, we believe that technology will be the key differentiator for our industry and we are prepared to embrace these interventions as quickly as possible.
With the advent of Industry 4.0, we look forward to automation taking the front seat in the manufacturing sector. Robust development and application of AI will certainly pave the way for efficient production and supply chain management.