Ways to survive and grow amid challenges in steel sector

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Published: October 23, 2019 2:08:33 AM

The consumption of railway materials including rails during April-August ’19 at 0.7 million tonne shows a growth of 18.3% as compared to last year.

Among the broad sectors, only three sectors, intermediate goods, primary goods and consumer non-durables, had positive growth during the month.

One of the best ways to tackle the stiff challenges that industry is facing today is to identify a few limited areas that are still showing growth. The next question is whether these growing pieces can be analysed to pick up the forces behind their growth and then selected for special focus in the hope that other segments also can build up the courage to grow by reorienting their strategies.

The latest IIP data released for August ’19 incorporate August production data which are quick estimates and would be revised next month when September data be released and by that time we would have final June data available. By next month there would hardly be a recalling of August data based on the revised monthly series and September data would predominate our analysis. This has been the reality of data analysis in a scenario where previous monthly figures (2-3 months lagged) are liable to revision. August data need to be considered keeping these factors in view.

Among the broad sectors, only three sectors, intermediate goods, primary goods and consumer non-durables, had positive growth during the month. The intermediate goods that has risen by 7% in the month, contains steel pipes and tubes (weights: 0.34) that has grown by an astounding 55% over last year’s August. Although the infrastructure and construction sector has gone down by 4.5% in August, one of its components, rails and railway materials (weights: 0.12) has clocked a growth rate of 48.2% during the month. The consumption of large dia pipes and tubes (>8.3/4”) in the country has gone down by 18.3% during the first 5 months of the current fiscal. It is noted that pipe imports fall under the category of API-70/80/100 grade, not available regularly from indigenous sources. The imports are in the form of line pipe grade and forming grade tubes and pipes of HR coils, line pipe grade plates. The primary sources of pipes are China, Italy and South Korea.

During H1 of the current year the total imports of pipes reached around 268,000 tonne (comprising of 165,000 tonne of carbon steel and 103,000 tonne of Alloy and SS categories, total valued at Rs 2,957 crore. It needs to be checked why this import volume also includes 40,000 tonne of seconds/defective grades of pipes. The demand for pipes and tubes has been sustained by high volume of orders required for pipelines used for transport of oil, gas and refinery products. The construction of slurry pipelines further supports the growth. The government policy of supplying piped water to every household by 2024 would enhance the demand for pipes except for the fact that PVC/HDPE are replacing steel to the extent of 10% due to cost advantage except in hilly terrains. India has also exported around 198,000 tonne of mild steel, alloy steel and SS pipes worth of Rs 1,442 crore to countries like Belgium, Canada, Italy. However the exports in last year were significantly higher which had made up the trade deficits in this category.

The consumption of railway materials including rails during April-August ’19 at 0.7 million tonne shows a growth of 18.3% as compared to last year. The demand for rails from track renewals, doubling of lines, gauge conversion, DFC and metro rails would be an average 1.7-1.8 million tonne/annum for the next few years and should be adequate for the domestic capacities created by SAIL and JSPL.

It may be noted that growth in railway network contributes significantly to demand creation for steel (long, flats, pipes, alloy and SS) for the purpose of construction of new stations/up gradation, manufacture of wagons and coaches for rolling stocks, railway electrification and development of industrial corridors. There needs to hundred percent import substitution for rails (head hardened rails for metro and high-speed). Thus for the next few years, demand for railway materials would not be a hindrance. Adequate supply from domestic sources has to be ensured.

Manufacturing sector had a tepid growth of (-) 1.2% in August ’19. It is seen that manufacture of basic metals (weight: 12.8% in manufacturing) has risen by 11.8% in the month. Out of this MS Slabs (weight: 0.84) production has gone up by a whopping 129.5% over last year’s August and has contributed 1.6% to IIP growth. Further output of HRC/sheets of carbon steel (weight: 1.35%) has contributed 0.44% to IIP growth. The consumption of semis (including slabs) has gone up by 2.1% in first 5 months of the current fiscal. The higher availability has helped steel making in the country. India has imported 234,000 MT of semis in H1 of F20 valued at Rs 922 crore primarily from China, Hong Kong, Italy, Russia, Singapore, UK , USA and UAE. It has exported 1.1 million tonne of semis worth of Rs 3,417 crore majorly to Indonesia, Italy, Malaysia, Nepal, Phillipines, Sri Lanka and Thailand. In case of HRC/S, the country has consumed 17.1 million tonne in April-August’19, a rise of 2.2% compared to last year. India has exported 2.7 million tonne of HRC/S valued Rs 10,567 crore and imported 1.46 million tonne valued at `8,024 crore.

Thus, maximising exports by exploring new destinations with a focus on neighbouring countries, replacing imports by equivalent/better products and services and reaching actual consumers even in remote areas, digital marketing to enhance customer base and lastly providing steel solutions in addition to steel profiles may be some of the critical steps to follow, now or never.

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