Steel To Get Its Lustre Back From Thrust On Infrastructure, Says Birendra Singh

The steel industry globally is notorious for its almost predictable business cycles that trundle from boom to bust. The booms have come when the demand for steel have exceeded availability, leading to a spate of investments in steel ventures. The busts have occurred whenever the built up capacity for steel-making have overshot prevailing consumption levels.

The bust this time round is being primarily driven by the Chinese “over capacity” in steel making. The nearly 30 per cent excess steel-making capacity in China has flowed into steel markets around the world at hugely subsidized rates, depressing steel prices everywhere. The downturn in the steel market has eroded profit levels of steel producers worldwide. In India, it has particularly hit the bottomline of the Steel Authority of India Limited (SAIL), Rashtriya Ispat Nigam Limited (RINL), Jindal Steel & Power (JSPL), Bhushan Steel and Monnet Steel, all of which have consistently reported losses since the first quarter of the 2015-16 financial year.

“The Chinese give 20 per cent to 30 per cent subsidy to their manufacturers,” said Union minister for steel, Birender Singh, speaking to newspersons at the Indian Women’s Press Corps on Thursday. The Union government has imposed anti-dumping duties on steel imports from China in March 2013, June 2015, December 2015 and May this year. It has also imposed safeguard duties and anti-dumping duties on cheap steel imports from China, Korea and Malaysia on various occasions across the past year.

Steel prices have still slid in the Indian market, notwithstanding the eight per cent increase in consumption annually. In May this year, market leader SAIL announced a voluntary retirement scheme for its employees as part of its cost-cutting venture, the first in eight years. Even so, the new minister for steel (Singh held the portfolio of rural development till four years ago) remains upbeat about the companies in his care.

“I see in them a trust in the initiatives of the government and I see them wanting to be part of India’s growth story,” the minister said. Not only did Singh not see a contraction in the industry, he expected the demand and consumption of steel to catapult over the ensuing years as infrastructure projects on the anvil, like roads, ports and bridges drove up the demand and consumption of steel.

Singh pointed out that even though India now counted among the largest producers of steel (with a cumulative capacity for 118 million tonnes), the per capita consumption of steel was still low at 60 kg compared to the global average of 204 kg. He reiterated that India on the go and the Make in India initiative would ensure a take-off in the demand and consumption of steel.

The public sector steel plants under the Union ministry, are therefore, not contracting, but expanding capacity. Plans are afoot to set up steel plants close to consumption centres in the north. A memorandum of understanding (MoU) has been signed between steel ministry PSU MSTC Limited and Mahindra Intertrade Ltd. for a joint venture to set up a first of its kind Auto Shredding Plant in India.

“The joint venture with Mahindra will take shape in 15 months,” Singh said, explaining that it would facilitate the setting up of steel plants (fed on melted scrap) close to steel consumption centres in North India. Most of the existing integrated steel plants are located close to their raw material sources at present.

An inter-ministerial group that met in May decided to expedite a proposed joint venture between SAIL and global giant ArcelorMittal to set up a plant for automotive grade steel, to exploit demand emanating from an automotive sector on high drive. That venture too, the minister hinted, would shortly be on track. The new lustre in the dull market for steel, of course, would essentially come from the Make in India and infrastructure building initiatives of a government that believed not just in policy making − but in “implementation” too.