The production of crude steel and consumption of finished steel are showing reasonable growth in the past one year and a half. India has already secured the second spot in steel production, surpassing Japan and is likely to overtake USA to occupy the second position in the consumption of the metal. The growth was driven by public and private investments in infrastructure projects like roads, rails, defence-led construction of ships, aircraft carriers, submarines and other activities in real estate and manufacturing sector including automobiles and heavy industries.
The enhanced steel supply was facilitated by fresh capacity augmentation (mostly brownfield), higher capacity utilisation and increased output of value-added steel as demanded by the critical sectors.
While the government and private entrepreneurs along with numerous user segments, who have reposed their faith in Indian steel producers, have become the proud torch-bearers of this, the credit also goes to the primary and small and medium-sized enterprises (SME) steel producers for maintaining an uninterrupted flow of steel in the domestic market.
In the current scenario, it is interesting to know the significant role played by the SME units in steel sector.
In a few categories especially in the long product area, the current market demand is way above the current capacities of the primary members.
Now that Bhusan Steel, Monnet Ispat and Electrosteel have been acquired by TSL, JSW and Vedanta, the erstwhile data on these (other than Electrosteel) need to be taken out from SME sector and shown under their respective primary producers.
According to the latest data, SME sector (IF plus electric arc furnace including the above ones) had contributed 43.74 MT of crude steel in FY18 that comprised 42.2% of the total production. During the first seven months of the current fiscal, this share has dipped to 40.2% with 24.5-MT output.
With the above acquisition of some of the SME units, this share will go down further in the coming months. Ingot rolling as opposed to continuous casting is considered as a hallmark of good quality clean steel. Blast furnace-basic oxygen furnace (BF-BOF) route of production in India had continued ingot rolling till the other day.
According to World Steel Association data, the share of ingot rolling in India has largely come down from 53.9% in 2000 to 13.8% in 2017, with corresponding rise in the share of continuous casting from 32.1% in 2000 to 86.1% in 2017.
The SME sector supplies TMT bars, wire rods, structurals (mostly light and medium), rounds and squares, flats and fishplates in the long product category. In TMT bars, the share of SMEs which was 60.7% in FY18 (production at 13.3 MT) has gone up to 61.9% in April-October 2018. In wire rods, SMEs’ share in FY18 at 48.7% (2.1MT) currently stands at 53.3%. Whereas in rounds, squares and flats, its share has dropped from 78.4% in FY18 (production at 7.4 MT) to 77.5% at present. In the structural category, this share, which was 75.6% (production at 6.1 MT), currently is the same at 75.6%. In the flat categories, the section is not a dominant player but still caters to the demand, emanating from various locations.
The plates rolled by SMEs are generally confined to lower dia (5-10mm) and the share by SMEs in non-alloy segment has increased from 6.7% (production at 0.344 MT) to 8.5% in the current period. In cold rolled (CR) products (non-alloy segment), their presence is predominant in the narrow-width segment (< 600mm width) and the share has dropped from 43.9% (production at 6.86 MT) to the current 35.4%.
In CR and galvanised plain/corrugated (GP/GC), the emergence of SME sector coincided with the opening of the steel sector to the private sector in 1980s as the investment requirement was much lower in the rerolling sector as compared to steelmaking costs. For their primary raw materials, billets, blooms, slabs, HR coils and CR coils, the SMEs depended on the flow of materials from primary producers, imports and the open market.
The share of SME sector in the galvanised steel sector has marginally moved up from 45.0% (production at 3.2 MT) to 45.7% in the current period.
In the case of tube and pipes sector, the role of SMEs is significant, its share had dropped from 90.0% in FY18 (production at 2.0 MT) to 87.5% in the current period.
The major tube manufacturers procure HR coils from primary producers like SAIL, TSL, JSW, Essar steel and imports. In tin plates, the share of SMEs has marginally dipped from 80.4% (production at 0.35 MT) to 79.7%, currently. In stainless steel category, the SMEs have a higher presence as biggies like JSL and SAIL have only a total share of 40% in the total capacities currently, with the balance 60% fulfilled by SMEs.
Thus, the total market size in long products, pipes and tubes and alloy and SS would continue to exceed the capacities (current and planned) of the primary producers that would necessitate the survival and growth of the SMEs. However, the critical factor of adherence to quality standards, specified by Bureau of Indian Standards (BIS), would largely justify their existence in the fast-changing market for steel.
Source: financialexpress.com