Dream run for steel sector likely to continue on back of favourable factors: Ranjan Dhar, chief marketing officer, AM/NS India

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September 08, 2021 3:45 AM

After a dent in demand during the second wave that hit in May and July; we are witnessing a good broad-based demand recovery since August, particularly from the auto, white goods and infrastructure sectors, he says.

A: Exports are inversely proportional to domestic demand. As we continue to see a strong recovery in domestic demand, we expect lower levels of exports in the coming months.A: Exports are inversely proportional to domestic demand. As we continue to see a strong recovery in domestic demand, we expect lower levels of exports in the coming months.

Indian steel sector has been on a dream run for a while now. The trend is likely to continue in the coming months supported by several favourbale factors including domestic demand, said AM/NS India’s chief marketing officer Ranjan Dhar in an exclusive interview with Surya Sarathi Ray. Excerpts:

Production and consumption of steel during the April-July period of the current fiscal is almost on par when compared with the first four months of 2019-20. How do you see the movement of the two going forward?

After a dent in demand during the second wave that hit in May and July; we are witnessing a good broad-based demand recovery since August, particularly from the auto, white goods and infrastructure sectors. Though, the impact of the second wave on the industry was not as severe as the first one because we all are well-prepared in terms of production, logistics, sales, and more importantly health and safety of stakeholders to effectively tackle the situation. Take an example of AM/NS India, the performance has been incredible despite the second wave. However, we should not let our guards down and be cautious about any new covid wave.

Exports, however, zoomed nearly three times in April-July FY’22 compared with April-July, FY’20. Will this trend continue?

Exports are inversely proportional to domestic demand. As we continue to see a strong recovery in domestic demand, we expect lower levels of exports in the coming months.

Do you get better realisation from exports?

It is evident from recent export data that exports trend higher only when domestic demand falls, which is what we saw happen during both the waves in India. So, although international prices have been consistently higher than domestic prices for more than a year, the high level of exports in the last quarter was a function of demand rather than prices.

What’s your view on domestic steel prices? Is it going to go up going forward? What are the factors that will lead to this movement?

Historically, Indian prices have followed import price parity. However, for the past several months, Indian prices are at a considerable (>20%) discount compared to international prices. Domestic prices will be supported by several factors in the coming months: firstly, the domestic steel prices are at a huge discount as compared to global prices; secondly, improving domestic demand, which we’re already seeing for the past couple of weeks; and thirdly, greater demand and supply balance, primarily created by expected production cuts by China in the second half.

How are the Chinese decisions to prune domestic production and disincentivise exports going to help the Indian steel industry?

The changes are certainly positive for the Indian steel industry but they will also help to keep global demand and supply in a more balanced state.

Which are the lucrative destinations for Indian steel firms? Are these markets traditional or emerging? What kind of products are in demand in these markets?

India has been consistently exporting steel to countries in SE Asia, the Middle East and the European Union, among others. These are traditionally strong export markets for us, where the country supplies both flat and long steel. We’re seeing increased opportunities to supply downstream products, including cold-rolled, galvanised and hot-rolled coil steels, to East Asian countries such as Vietnam and Malaysia.

Will AMNS India scale up its special steel production using the PLI incentive?

The PLI scheme is a very welcome policy and paves the way for the Indian steel industry to step up the production of domestically manufactured specialty steels. We absolutely have plans in place to enhance our value-added product portfolio and capacities to reduce import dependence for these steels but also grow India’s share of value-added steel exports over time.

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