The general election in India this year is so unique an event that for the last few weeks, no news other than that exclusively connected with political parties and their members, directly or indirectly, is finding a place in the media.
Whatever little was left in the activity chart of various government departments has taken a backseat for fear of violating the election code and the industry is counting the days when the big uncertainty would be over. Only some judgments of the highest court are creating ripples in an otherwise stagnant industrial scenario.
After Karnataka and Goa, it is now the turn of Odisha to receive the penalty and other measures to eliminate illegal mining. It is quite possible that once the churning is complete in the coming months, there would be stability in supply of this critical input to the steel and sponge iron industry.
Meanwhile, some global developments that are of interest to domestic players are making news. One such development relates to the automobile sector. It is heartening to note that Europe, after a gap of nearly six years, is showing signs of demand recovery. Apart from Germany, industrial houses in UK are on the path of recovery. The major automakers in the US, Japan, Germany and South Korea are introducing new models.
However, the fight for share between steel and aluminium in automobiles is gathering heat. The Ford?s new F-150 truck’s all-aluminium body has taken the fight directly into the court of steel, which has already introduced advanced high-strength steel to meet the manufacturing needs of the vehicle in conformity with latest fuel efficiency norms.
In response, Volkswagen has replaced all aluminium parts with steel as aluminium has been found to be substantially costlier than steel regarding raw material, conversion and assembly. Interestingly, more fuel efficiency implies light weight but customers, particularly those belonging to Asia and other East European countries, perceive that too much lightness in weight is also associated with less safety.
As a result, the threat of competition between steel and other competing materials in the automobile sector happens to be lower in India, with steel occupying around 53% share in total raw material consumption, followed by plastics (14% share with maximum replacement of steel in fuel tanks) and aluminium (around 5%).
In FY14, total automobile production in India at 20.6 million units increased by 4% compared with the previous year, although passenger cars, commercial vehicles and three wheelers witnessed negative growth.
A number of steel majors have set up facilities to roll out auto-grade, high-strength, lightweight steel under state-of-the-art-technology. But the health of the auto sector must be brought back to a reasonably higher pitch to keep pace with the emerging capacity in steel. Growth in per capita income, more availability of credit following reduction in interest rate, development of the road network, price of diesel and easy interstate movement of goods are some critical factors that account for improvement in prospects of the auto sector.
It is a tough challenge for the new government to effect economic growth of around 6% in FY15 with an emphasis on manufacturing, which would make possible the gradual realization of other major goals.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal