Excessive protectionism in the country’s steel manufacturing industry is hurting the user segment and affecting quality of products as well as growth in the country’s steel consumption, according to Nikunj Turakhia, president of the Steel Users Federation of India (SUFI). Protectionism has to be done in a way that the user industry is not affected. The user should get steel at the right price and there should be a level playing field, he said. Steel prices have been going up and have almost reached peak levels, he added. For instance, hot roll steel price has gone up from $480 to $620 in a space of three months and this should come down, he said. Turakhia said while auto makers have to meet higher standards, steel makers are not ready to supply the same, though they claim to have capabilities. The standards imposed on the imports of certain grades of steel need to be re-looked at as it is a non-tariff barrier to trade, he said.
“Volumes in India do not allow for continuously manufacturing of these products while the auto industry wants just-in-time deliveries. So, a lot of new products do not come to India,” he said.
This is an aberration caused by the steel quality control order, and there is a need to exempt international standards such as Euro, American or Japanese standards from this order, instead of imposing specific Indian standards, he said.
As imports of these products have come to a standstill, component makers either use lower quality material or are not supplying to their buyers at all, Turakhia said.
The demand from automotive segment accounts for 10% of the steel market demand and is slated to grow at 7 to 8%. The construction and infrastructure sector, which accounts a large share of the steel market, is not demonstrating much growth on the ground despite spate of project announcements, Turakhia said.
Apart from Tata Steel and JSW, none of the steel makers are doing well and there is no investment into products or facilities happening in the sector, he said.
The EBITDA of the steel companies was positive but unsustainable debt costs. A lot of M&A are expected in the steel sector, he said. JSW Steel is an exception. Sanjay Sharma, SVP, automotive steel, JSW Steel, said, the collaboration with JFE Steel Japan for automotive steel has fully ramped up production of automotive steel and was running at 95% capacity, servicing all kind of automotive products.
In the last one year the per capital steel consumption has gone up only by three kg to 63 kg while the target is to get to 160 kg by 2030. The total production target is 300 million tonne per annum by 2030 from 105 million tonne per annum.
SUFI and Steel Group hosted a automotive steel summit in Pune on Friday to bring steel producers, auto companies, auto vendors, technology and equipment suppliers as well as steel distributors on the same platform. SUFI has around 7,000 members, mostly from Mumbai, Gujarat, MP, Kolkata and Tamil Nadu.
GST is a boon to the steel industry as a large section of the informal and unorganised trade will now be forced to become organised and this segment accounts for 30% to 40% of the steel industry, Turakhia said at the summit.