Auto cos to drive demand for value-added steel

Mumbai, Nov 29 | Updated: Nov 30 2006, 09:33am hrs
Tata Steels plans to acquire Anglo-Dutch steel maker Corus may have hit a roadblock, but the $25 billion Indian steel sector sees increasing demand for value added products driven by a 15% growth in Indias automotive sector.

With global automotive companies like Renault, General Motors and Volkswagen planning to manufacture cars in the country, Indian steel makers foresee a 15 - 20% higher demand for steel products including HR, CR and galvanised steel for automobile production.

Tata Steel saw a 30% increase in sale of steel for the automotive market, for the first half of the current fiscal. The company sold 4 lakh tonne of steel to the automotive sector, with the sales of galvanised products going up by 53%. This may constitute only around 8% of the companys overall sales of 5 mt, but this will grow in future, says Hitesh Agrawal, an analyst with Angel Broking. India was the 11th largest car manufacturer in 2005, producing more than 12 lakh cars.

Companies like Essar and Jindal, which already have a significant automotive presence, are likely to produce more and more value added steel for the automotive market. Steel producer Uttam Galva has tripled its exposure to the automotive market this year, the companys director Ankit Miglani told FE, adding that automotive steel is a significantly growing market. French automotive major Renault has tied up with Mahindra & Mahindra to make 50,000 Logan cars at its plant in Nashik, Maharashtra. General Motors of the US is setting up a greenfield production unit in Maharashtra, while Germanys Volkswagen AG will set up a plant near Pune to produce up to 1,10,000 vehicles a year. Price realisation on flat products used in the automotive industry is 15% to 20% higher, compared to that of long products, adds Agrawal. India makes a total of 50 million tonne (mt) of steel, and the industry is growing around 8% per annum.