IT was thought only a month back that European crisis of sovereign default would be somehow managed with all the efforts put in by all concerned- EU members and IMF. But subsequent events proved that recessionary trends are going to be of longer duration and more widespread. The latest purchasing managers? indices in various countries including those in China and India indicate clearly a poorer market sentiment which may accelerate anti investment and anti expansion tendencies at least till demand scene improves expectedly in the oct-dec?11 quarter. A natural corollary of such a scenario is the search for investment in the still growing markets of China and India by the major global steel producers who are too worried to find markets for their products particularly the high end products for which there is increasingly excess capacity. The latest in the fray is the acquisition of National Lamination Industries, a service centre having cut to length machines, slitting lines, power presses and latest testing facilities near Mumbai by NLMK of Russia for processing and distributing Grain Oriented steel to the transformer manufacturers. NLMK, the fourth largest steel producer in Russia, produces around 0.34 million tonne of CRGO out of a current capacity of 15 million tonne. Presently, the capacity of National Lamination Industry would not enable NLMK to export more than 20, 000 tonne per annum of CRGO under this arrangement. But considering that indigenous availability of CRGO is nil in the country, the supply of ready-to-use CRGO in M3, M4 and M5 grades of that much quantity would put tremendous pressure on the unit to enhance its capacity.
Also there is likely to be demand for special grades like MOH, TRANCOR and ZDMH which NLI is capable to process. It may be recalled that indigenous majors like SAIL, Tata and JSW are also considering technology tie up with global players for technology transfer to cater to the current level of demand of around 0.15 million tonne of CRGO steel which is slated to go up at a fast rate once the Ultra mega power plants commence operation. Ability to produce special grade steel through appropriate technology transfer from the global majors is the ideal route for meeting the domestic shortage. If this process is delayed due to multiple reasons associated with doing business in the country, direct imports of the material or indirect imports through service centre route is the second alternative. The consumers may gain, but not the indigenous steel producers for whom the challenge gets tougher.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal