The steel industry in India, like other countries, has been affected by the global oversupply created by China, which led to cheap imports replacing domestic steel. This impacted the margins of all steel makers. However, the government’s intervention by bringing in protective trade measures of various forms provided some respite.
Since the last quarter of the earlier financial year, we’ve improved and clocked record sales of around 3.8 million tonnes, about 20 per cent up over the same period last year. In the first quarter of FY17, we have posted the highest ever in saleable steel production, with 11 per cent growth and a nine per cent growth in operating earnings. Simultaneously, the government’s plans to invest heavily in infrastructure is expected to boost the demand for domestic steel in coming times.
Is there a demand pick-up? What are the factors preventing a rebound?
In the April-August period, domestic steel consumption grew only 1.3 per cent. During the same period, there was a fall in the import of finished steel of 30 per cent and exports rose 24 per cent. We had a good monsoon and that will surely translate into a rise of steel consumption in rural markets and, demand-wise, a better second half for domestic steel makers.
The huge infra push from the government in form of smart cities, expansion of road and rail network, favourable policies like Make in India, indigenisation of sectors like defence, heavy engineering, etc. will all require substantial amounts of quality steel as a major input. So, we expect that in the coming years, there will be a spurt in demand and no factor would stop that rebound.
How far have the minimum import price (MIP) and anti-dumping and safeguard duties helped? If MIP had not been implemented, what would have been the price scenario? Should MIP be further extended?
The government extended MIP on August 4 on 66 items for a further two months. Further, in March, it extended the safeguard duty on hot-rolled coil (HRC) imports, placed in September 2015, till March 2018. The Directorate General of Anti-dumping & Allied Duties recommended provisional anti-dumping duty on HRC and cold-rolled flat products, which also have been issued. Imposition of provisional anti-dumping duty on wire rods is also under consideration.
In the face of huge global oversupply, almost every other country has resorted to trade safeguard measures of some degree to shield their domestic steel industry. At such times, these are required to give a level field to your own industry.
What is your capital expenditure and your major projects?
For this financial year, capex is planned at Rs 4,000 crore. We spent a little over 25 per cent of this amount in the first quarter of FY17.
SAIL had undertaken modernisation and expansion of its five integrated steel plants at Bhilai, Bokaro, Rourkela, Durgapur and Burnpur, and the special steel plant at Salem, at an investment of Rs 62,000, to enhance crude steel production capacity from 12.8 million tonnes per annum to 21.4 mtpa. All major facilities under this plan at Rourkela, IISCO (Burnpur), Durgapur, Bokaro and Salem have been completed and are under operation or stabilisation. Many of the major projects at Bhilai has been completed; others are in advance stages of installation.
What is the status on your foreign projects?
The major overseas project is at Mozambique. Our joint venture in coal mines there is a strategic investment, our first footprint outside India to acquire any coal mines. Till date, we have exported around 1.3 mt of coking coal from the mines. The cost of operations at the time of acquisition was quite high but in due course, a number of steps were taken that have resulted in considerable reduction of the coking coal price.
Sources :business-standard.com
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