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‘Steel cos unable to recover variable costs’ |
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NEW DELHI: The onslaught of cheap imports from China has forced domestic players to sell products at a discount and they are unable to even recover variable costs, SAIL's new chairman Prakash Kumar Singh told TOI.
Backing the recent increase in domestic prices following minimum import price (MIP) imposed by the government, Singh said: "Imports have impacted the margins of all domestic producers. We have to understand that steel contributes to nearly 2% of GDP and its performance is an important indicator for growth. So, if this sector is ailing, the effects would be felt by the entire economy."
So far during the current financial year, the government has increased the import duty on certain products, imposed safeguards duty as well as MIP to provide protection to domestic producers as several of them are facing financial distress. Companies such as Bhushan Steel have been forced to realign operations after the aggressive expansion they had planned during the past few years. Similarly, the cancellation of coal blocks has hit those like Naveen Jindal's JSPL as rating agency ICRA recently downgraded the rating on some of its instruments to indicate moderate risk of default.
SAIL reported losses of over Rs 2,200 crore during October-December quarter and Singh said the recent government actions along with a stabilisation of demand are expected to help improve its financials around mid-2017. Global prices are down around 50% since 2012, prompting companies to offload inventory at a discount. In addition, there has been a surge in imports due to slowdown in China. Last year's rise in domestic consumption was fuelled by imports, Singh said.
"Cheap imports from China are not only grave for the domestic steel market, which employs around 20 lakh people, directly and indirectly, but it poses a threat to the entire global steel industry. Despite contracting its output by 2.3%, China remained an aggressive player with exports of more than 112 million tonnes in 2015, which is more than the production of India or even Japan, registering 20% growth over 2014," Singh said in his first interview since taking charge in December.
The public sector company, however, is not altering its expansion plan that will see its production capacity rise from 13 million tonnes to 20 million tonnes, as it looks at the long-term prospects. Singh also said the focus will be on garnering higher market share and reducing manpower cost, which the expansion will take care of.
Source : timesofindia.indiatimes.com
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