What will be your key focus areas and strategy for SAIL?
We are currently focussing on completing our remaining modernization projects and ramping up our production from 13 million tonnes (MT) to 20 MT over the next two years. SAIL has invested over Rs 70,000 crore in its modernization and expansion programme (MEP), including modernization of the mines. At this point, ensuring cost reduction remains the prime focus of all our activities. The global steel industry is going through challenging times and competition has increased manifold. In a situation like this, it is crucial to consolidate our domestic market share. Manpower is our biggest asset and every employee has to align with the company's goal, think of themselves as the best employee in the industry and think like a global leader. This requires a massive communication exercise, which we have already initiated. An increase in volume with current available manpower would automatically bring the operational cost down thus improving company's margins.
How serious is the threat of cheap imports from China? By when do you expect the sector to emerge for this situation?
Cheap imports from China are not only grave for the domestic steel market, which employs around 20 lakh people, directly and indirectly, but it poses a threat to the entire global steel industry. China despite contracting its output by 2.3% remained an aggressive exporter with exports of more than 112 million tons in 2015, which is more than the production of India or even Japan, registering 20% growth over 2014.
We have to realize that at this point we do not have any other choice but to be resilient and device cost-effective strategies to face the challenge. The last year saw a subdued growth in large economies and steel demand in countries such China, he US, Europe, Russia etc. started shrinking. China has created a huge overcapacity and is flooding the rest of the world with exports priced very low. This has affected the domestic steel market and cheap imports have disturbed the domestic demand-supply equilibrium bringing down the share of domestic produce in total consumption. Although domestic consumption has registered an increase of 4.2% over the previous year, expansion in demand was largely met through imports, which jumped to 9.3 MT clocking an annual growth of 24%.
Adequate policy framework has to be in place for any sector facing such threats. The government has announced several measures, such as safeguard duty on HR coils in September 2015 and more recently the minimum import price (MIP). They are expected to provide gradual improvement. At the same time, the government's thrust on growth including sectors such as infrastructure, automotives and capital goods is likely to boost domestic steel demand. So, the sector will gradually pick up the growth and in coming years' country would see reasonable overall growth. The finances are expected to improve with stabilization of demand and that should be starting to show signs by next year, may be around the middle of 2017.
Steel companies have increased prices after MIP was put in place. Doesn't this protection adversely impact domestic consumers?
Imports have impacted the margins of all domestic producers. All the companies are unable to even recover the variable costs. We have to understand that steel contributes to nearly 2% of GDP and its performance is an important indicator for growth. So, if this sector is ailing, the effects would be felt by the entire economy. The nation's 300 MT production capacity target by 2025 also depends on the performance and health of the domestic steel sector. A healthy steel sector can provide a conducive atmosphere for growth. Government's action in bringing in appropriate policies and measures for the sector is expected to bring some relief to the sector.
Source: TOI