Steel players focus on rural market to ramp up revenues

Written by Smita Joshi Saha | Mumbai | Updated: Feb 1 2009, 03:46am hrs
A slowdown in demand in the automotive sector and shrinking export orders have prompted leading steel companies to increasingly focus on the rural market. This is in line with cement companies, who have already riveted their attention to the rural housing sector.

Experts believe that steel demand growth in the rural market is currently at 5-6% and is likely to grow further.

JSW Steel, Indias third largest steel producer, while announcing its Q3 results, said it will focus on the rising demand in the rural market and Q4 will witness maximum revenue coming from the non-urban segment.

We are also specially designing products for the rural market, which include galvanised sheets, colour-coated sheets, among others, said Sajjan Jindal, vice-chairman and MD of JSW Steel.

Similarly, Essar Steel said it is currently serving the small and medium enterprise segments through its 80 retail outlets in India. The company plans to add more outlets in order to meet the rising rural demand. An Essar Steel spokesperson told FE, About 20-25% of our total revenue comes from the retail segment.

The company sells galvanised sheets, hot and cold rolled coils, and a small percentage of long products through its retail outlets.

Fitch Ratings on Thursday, in its metals and mining India report, said, Demand slowdown in major consumer regions like China and other Asian markets resulted in huge inventory pile-ups which, with declining exports, is seeing supply being diverted to domestic markets. This is likely to put domestic prices under more pressure.

It also added that global steel production declined 12.4% year-on-year in October 2008, following a 3.2% year-on-year drop in September 2008.

Experts believe the fall in exports and decline in new orders will force more players to sell their products in the rural markets.

Recently, the Union ministry of steel and the Institute for Steel Development and Growth had decided to jointly commission a study to assess the demand for steel in rural areas up to the year 2020 and will promote increased use of steel in rural India. These include the introduction of steel bullock carts in villages and facilitating increased usage of steel in rural housing and rural construction.