Improve competitiveness by innovative sourcing, says Sushim Banerjee

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Published: January 9, 2018 3:52:37 AM

It is very tempting to look back at the end of the year to what the domestic steel industry has achieved and what has been missed.

innovative sourcing, what is innovative sourcing, challenges of innovative sourcingIt is true that a supportive government to the challenges faced by the industry reiterate the faith and trust reposed by the industry in the soft intervention of the government.

It is very tempting to look back at the end of the year to what the domestic steel industry has achieved and what has been missed. It is true that a supportive government to the challenges faced by the industry reiterate the faith and trust reposed by the industry in the soft intervention of the government. In fact 2017 would be best known by the pro-active and positive role played by the government in dealing with steel trade-related issues, purchase preference to domestic players in government funded projects, mandatory quality certification for indigenous and imported products. There are a few important lessons that Indian steel industry can learn and set as New Year targets.

First, the long battle fought with China, South Korea, Japan and Russia with respect to the injury imposed on the domestic industry due to dumped and cheap imports has taught us to institute a regular import watch mechanism that would immediately trigger off the red signal on surging imports of any category. As USA is the front runner of instituting an import monitoring agency and has successfully debarred all imports from many countries, even at the risk of spoiling the free and fair trade practices approved by WTO, the advance signalling on imports of steel is a task that can be set up for Indian steel industry in 2018.

Data indicate that imports of a few steel containing goods like metal products, electrical equipments, furniture and consumer durables have shown a rising trend in the recent period and an advance signal on incoming imports in the next 2/3 months would also help these industries to devise strategies to arrest the adverse impact. A joint effort along with other wings of the government may be considered in this regard.

Talking of import threat during April-November’17, it is seen that India has imported defective quality of CRC, coated products, tin plates, pipes and bars/rods totalling 0.3 million tonne valued at `958 crore in carbon steel category. Let Indian steel industry know what are the specific uses (including those under advance licences) these imported defective steel cater to and why their requirements cannot be met by the standard grades from domestic sources. A product wise analysis with interaction with the importers can be undertaken by the producers as second thrust area for the industry in 2018.

A secular rise in steel prices in 2017 has led to reasonable EBITDA margin for the ailing industry, which would help the brown field expansion to continue smoothly. Although the threat of cheap imports may not plague the steel industry at least in the first half of 2018, some projections have signalled a drop in steel prices in the later part of second half. It appears that factors like cut in IF capacity in the long products in China, which is contributing to rise in domestic prices of semi finished steel and rebar and the economic growth in Japan, EU leading to stability in flat prices would ultimately peter off in the later part.

However, this scenario may not be realised as stimulus measures by enhancing public debt to encourage the health of indigenous industry (income generation and employment) would be increasingly adopted by many countries keeping in view the larger interests of their electorates. India being the exception to capacity augmentation endeavours as has been duly acknowledged by global steel forum must continue to thrust on exports in 2018 as domestic demand growth may not uniformly keep pace with capacity addition. On larger perspective, export growth in steel and steel containing goods contribute to lower CAD.

Mandatory quality control order of various steel products has been issued by the government and more products may come under the purview in 2018 in the interest of safety and health hazards, national security, environment and non-deceptive trade practices. After the issuance of the order, the implementation of the specific order needs to be monitored both at the ports by the customs authorities for the imports and also its use in the domestic market.

It is not known how much attention is given to the successful implementation of the mandatory quality control order and by which enforcing authority. A holistic approach in consultation with BIS, department of consumer affairs to institute an enforcement mechanism for the quality control order may be thought of as fourth thrust area for the year.

During 2018, nearly all NCLT referred cases would be finalised with emergence of the new governing team or old restructured team which would commence the commercialisation of the idle capacity as well as the expansion of new capacity. Additional availability may be recurrent in steel supply scenario and a viable marketing strategy can withstand the surprises.

The challenges for Indian steel industry in 2018 continue to be manifold. These are strengthening of all efforts in improving competitiveness of the industry by innovative raw material sourcing strategies, producing more high strength, low-weight products, fast reaching the customers and attending to their concerns in terms of price and quality, and assuring them of delivery schedules matching with their requirements. The best way to enhance steel consumption in the country is to make customer orientation an integral part of all the strategic thrusts by the industry.

The author is DG, Institute of Steel Growth and Development

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