The steel industry is undergoing one of its worst crisis because of shrinking bottomlines and rising debt and the only way out is to fire-wall the domestic market from a global collapse and to push demand, SAIL chairman P.K. Singh said in an interview to The Telegraph.
The government has been supporting us and has imposed a minimum import price to protect us from dumping by the Chinese and other East Asian steel makers. This has to be sustained as the entire global steel industry will continue to be in crisis for some time because of the huge overcapacity that has been built up," Singh said. The government had last month imposed minimum import prices ranging from $600 a tonne for coated flat steel to $550 a tonne for cold-rolled steel and $425 a tonne for the hot-rolled variety besides extending the safeguard duty.
Minimum prices were imposed following hectic lobbying by steel majors, including SAIL, Tata Steel and Jindal Steel & Power, who maintained that the duty shield to protect local manufacturers was not working as a global industry beset by over-capacity was willing to dump products at extremely low prices and find ways to circumvent tariff.
According to OECD estimates, global steel-making capacity stood at 2.37 billion tonnes in 2015, but declining production meant only 67.5 per cent of the capacity was being used against 70.9 per cent in 2014. China, the world's largest steel maker, produced about 834 million tonnes (mt), nearly 300mt higher than its domestic demand.
Chinese steel makers have been accused of dumping by India, the UK and the US and lowering prices in the global market already in the throes of a recession, leading to a turmoil in the steel business. "China will cut down steel-making capacity by 100mt but that will still leave them with an overhang of 200mt," Singh said.
India is the third-largest steel maker in the world and faces a situation where demand is at two-thirds of the total 120mt capacity. Lower demand coupled with dumping has seen prices fall more than 20 per cent over the past two years.
Lower sales on account of a "huge surge in imports of low-priced steel" from China and Japan had resulted in SAIL announcing a Rs 1,528.7- crore standalone net loss for the quarter ended December. The steel behemoth had reported a profit of Rs 579.1 crore in the same quarter of the previous fiscal. Other steel makers had fared no better.
"Steel demand has to be pushed up, we have one of the lowest steel demand per capita, the only way to do that is to push demand for infrastructure, construction, automobiles and capital goods, which are all steel-intensive," Singh said. India's per capita consumption of steel stands at just 60 kg compared with China's 510 kg. Global per capita consumption stands at 217 kg.
"Luckily for us in the steel industry, this government is trying to take steps to revive these sectors."
Singh took charge of SAIL at a crucial time for the steel maker, which has started suffering losses after a long period of profit. Before he was promoted to the top job, a worried government had ordered the appointment of an external consultant to study SAIL's performance in a bid to cut the PSU's mounting losses.
SAIL had started a modernisation-cum-expansion programme before the global financial crisis hit the industry. This expansion programme is set to increase the production capacity of the steel maker to 20mt by 2018 from 14mt. SAIL has spent nearly Rs 70,000 crore on the expansion programme and cannot mothball the expansion now. "Stopping work at this stage makes no sense as that would simply be a waste," Singh said.
Singh, 57, is a SAIL insider and an alumnus of IIT-Roorkee. He had a long stint at both Durgapur Steel Plant and IISCO, Burnpur, after being inducted into SAIL at Bokaro in 1980. Singh's core experience is in the blast furnace technology and operations, but the metallurgical engineer is also considered a "thinking" technocrat, having authored several technical papers on steel-making and industry trends.
Source: Telegraph India