There is nothing much to write about the economy and industry. The logjam in Parliament is taking its toll on all that is relevant for the people and the country. The current political scenario is threatening the platform that is being built for the last one year. The manufacturing PMI for July, 2015 assessed before the beginning of the political impasse at 52.7 was higher by 3% over the previous month and is bound to come down when the current month’s indices are published.
Decline in commodity prices is unabated. And almost in all categories, subdued global demand and prices are creating depression in the domestic market realisation. As regards steel, apart from the US, the prices are on a downward mode in the major markets in Europe, Brazil, Japan, China, Russia, Turkey and West Asia.
On an average, there has been a 25-30% drop in steel prices in the last six months and the spread between billet and re-bar, HR and CR, CR and galvanised has significantly come down. One common feature of the current scenario is that it has uniformly affected both raw materials and finished products and as a result the end users are failing to take advantage of the lower level of, say, steel prices by adding inventory as their end product prices do not justify more than minimum level of inventories.
The seasonal impact on market demand coupled with significant rise in cheap imports — the result of surplus steel capacity in China, Russia, Japan, South Korea —may not allow any immediate upward price movement. A few short-term measures may be appropriate.
First, all capital repairs in steel plants scheduled for next few months can be taken earlier. It would help restrain fresh availability in the market and match with rise in demand expected in Q3 of the current fiscal.
Second, utmost efforts must be garnered to thwart cheap steel imports by strengthening WTO compliant anti-dumping and safeguard mechanism. The commerce ministry has recommended to the finance ministry for increase in import duties against rising aluminium imports. It is heartening to note that the finance ministry is seized with the problem of stalled steel projects worth of $45-50 billion and how the incremental domestic demand is fed by rising level of cheap imports from China, Russia, Japan and South Korea. It has also set up a committee to go into the detailed impact analysis of CEPA/FTA treaties on specific sectors in the economy. HR imports through concessional duty from Indonesia under FTA are already causing market distortions.
Third, it is the most appropriate time for the domestic industry to take up strongly with government departments in the infrastructure sector like DIPP, MORTH, NHAI, Urban Development, Rural Development, Civil Aviation, Defence (particularly Navy, Army), Railways, Power, Coal, Steel & Mines, Petroleum and Irrigation to use India-made steel in all their existing and incoming project execution to the maximum extent possible.
A collective approach from a group of major and medium steel manufacturers to develop strong justifications in favour of Indian steel in total range of steel grade, profile and dimensions would go a long way to convince the major Indian end-users to choose India-made steel as has been done by the government in many other countries for their own industries.
This is a critical situation and some temporary hand holding support from a sympathetic government to the woes of industrial segments would only contribute to the overall growth and progress of Indian economy. Promotional efforts for use of more steel by designers, architects in existing and new application areas and in semi-urban and rural sectors must be taken up in true spirit as essential part of marketing strategies.
The author is DG, Institute of Steel Growth and Development. Views expressed are personal.