Tata Steel expects steel demand to bounce back in the second half of the fiscal
year, led by segments like passenger vehicle sales, construction and rural homes, in what
perhaps marks the first upbeat remark from a top manufacturer about the domestic steel
market that has been sagging for a year and half.
“We see the steel sector picking up during the second half riding on auto, construction and
rural demand. Indian demand should be met out of Indian production of steel. Imports are not the best way for it,” vice president for steel
marketing and sales Peeyush Gupta told ET in an exclusive interview.
The automotive sector accounts for nearly 18% of Tata Steel’s sales by value. A revival in the sector — sales have been strong for car and
twowheeler makers for several months now and they are expecting a bumper festival period — is making the company upbeat about
demand from that sector. In commercial vehicles, order books are full in segments like excavation and mining equipment.
State and central government funding in infrastructure and construction, particularly in flyovers, bridges, airport terminals and roads, is
expected to see a rise, with the railways too likely to add to the construction boom. “Since steel accounts for 50% of construction, we are
betting big on it to raise overall demand,” Gupta said.
“The rural market is doing well, particularly in the individual homebuilding segment where steel accounts for some 1215% of cost, with
growth also picking up in Tier 2, Tier 3 and Tier 4 towns,” Gupta said. In rural and in semiurban and urban areas in top 40 towns including
places like Rohtak, Gorakhpur or Kanpur, Tata Steel expects a spurt in sales of its branded galvanized corrugated sheets for roofing, along
with tubes and bearings. It also expects demand from segments related to agriculture. However, in Tier 1 cities, where the builders or
promoters are mainly involved in residential segment, demand is yet to pick up.
“Retail and branded steel now account for 45% of our sales by value compared to 2001 when it accounted for only 5% of sales. In this, the
SME segment is critical for us since it accounts for nearly 20% of our branded retail sales by value. We have systematically targeted them
since they want the steel to come to them,” Gupta said.
Traditionally, the SME segment has been underserved by the steel industry. Tata Steel has created a separate distribution channel for it
and also introduced watermarking of steel to add to its authenticity. It is also going deeper into villages with hardware shops located within
a 510 km radius. Expansion to capacity, like addition of a thin slab caster, and the new Kalinganagar plant in Odisha is poised to reduce
the company’s commodity play further.
Share of valueadded products, which now contribute some 1015% of sales, is set to go up further with special quality steels for gas
cylinders, oil pipes, medium carbon pipes and highend engineering being added to its portfolio. An emphasis on value engineering, where
Tata Steel is a collaboration partner for auto companies in design and prototyping, is also set to increase its share in automotive segment
from the current level of 18%.
“India is a good place to make cars since it has the right ecosystem in terms of technology, talent and policies,” Gupta said.
SOurce: ET