As the steel industry is passing through one of the most challenging times, the newly-appointed SAIL chairman Prakash Kumar Singh has his task cut out. In an interview with Surya Sarathi Ray of FE, he speaks of the company’s strategies to counter competition and future plans. Excerpts:
The steel industry is passing through a difficult phase. How long do you think this cycle will continue? Which are the factors that have the potential to lift the sector from the current downturn?
The global steel industry is facing challenging times mainly due to the over capacity created by world’s largest steel producer, China and its consumption slowdown due to economic restructuring. China, despite contracting its output by 2.3%, remained an aggressive exporter with exports of more than 112 MT in 2015 (more than the total production of India), registering 20% growth over 2014. India has been one of the major destinations for dumping of surplus steel by China. Although domestic consumption in India has registered annual increase of 4.2% in 2015, the expansion in demand was largely met by imports which jumped to 9.3 MT registering a growth of 24.1%. Under such circumstances, recent favorable policies announced by the government and its concerted efforts to enhance infrastructure spends in viable sectors is expected to improve domestic demand and provide some impetus to the Indian steel industry in the coming financial year.
SAIL has been doing badly over the last few quarters. Are better days near?
The effects of demand-supply imbalance in global steel industry primarily driven by the slowdown in steel consumption in China after three decades of growth has had an adverse impact on the performance of steel producers across the world. Top and bottom line of the Indian steel producers have also been hit by global factors. SAIL also had to suffer a net loss for the third quarter of FY16, primarily due to a 24% decline in net sales realisations over the corresponding period last year. In case of some of the products, the domestic steel companies are even unable to recover their cost of production. However with recent government support, prices have started to recover gradually.
SAIL is trying to reverse the trend by ensuring cost reduction and ramping up of production, which remains the prime focus of our activities.
India is emerging as a large economy and remains a bright spot for the world. Our country shows solid signs of handsome growth potential in coming years providing a base for comfortable consumption forecast. India’s per capita consumption at 59 kg is much below the global average of more than 216 kg and China’s more than 500 kg, which presents the domestic steel sector with enough room for growth. This, coupled with government’s thrust on infrastructure as well as on manufacturing will help in improving demand of steel intensive sectors and provide the much needed support for the domestic steel industry’s growth.
How to tackle cheaper imports from China, Japan and Korea?
Cheap imports from China and countries exporting steel to India under various trade agreements have affected the domestic steel market, which has recorded steep decline in prices since August 2014. Chinese export prices fell by almost 50% during July, 2014 to December 2015 impacting steel prices globally.
Under such a scenario, Indian steel producers sought intervention of government to provide relief measures to domestic industry. Measures in the form of safeguard duty on HR Coils in last September and recently in the form of Minimum Import Price (MIP) imposed on February 5, 2016 on certain tariff lines are expected to provide temporary relief. Long term trade remedial measures in the form of anti-dumping and countervailing duty are required for preventing dumping of unfairly priced imports.
Can you give us a tentative time-frame for the completion of your company’s ongoing capacity expansion programme? Will SAIL postpone its “Vision Document” programme aimed at reaching 50 MTPA hot metal capacity?
SAIL has invested more than R70,000 crore in its modernization and expansion programme including modernization of the mines. Our modernization and expansion programme is cost and energy-efficient and will usher in the state-of-the-art technologies for producing world class products with best in class quality of value added products. Most of our new facilities and mills have been operationalised and we are currently focusing on completing our balance modernization projects and ramping up our production from 13 MT to 20 MT saleable steel gradually.
Is SAIL-ArcelorMittal JV on track?
SAIL recently signed a MoU with ArcelorMittal, world’s leading steel supplier to the global automotive sector, which has approximately 17% market share and the MoU is moving forward in the right direction.
Source: Financial Express