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Steel companies may miss target of 300 million tonne production by 2025 |
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KOLKATA: Low domestic demand and cheap imports could force Indian steelmakers to go slow on output, a move that can cloud India's target of producing 300 million tonnes of the alloy by 2025.
With China devaluing its currency twice this week, the domestic steel industry appears less confident about its prospects. Steelmakers ET spoke with did not want to go on record and question the sustainability of the country's production target. But internal debates are getting louder and worry lines deepening across the sector, as it becomes clearer that without stringent policy measures, flow of cheap imports will continue hurting the sector.
"We have set a target of 300 MT by 2025, but we need to have safeguard duty of 25-30% to protect the native industry from imports. China already has an advantage in terms of transport infrastructure, low cost of funds and energy, etc," said Ravi Uppal, managing director and CEO of Jindal Steel and Power Ltd, a leading steelmaker.
In the first five months of 2015, India has become the third largest steel producer and is on track to emerge as the secnd largest soon. Last fiscal, the country was at No. 4 with output at 88.25 MT.
Also, per capita steel consumption in India is about 60 kg compared with the world average of 216 kg, which also supports estimates about the sector's growth potential. However, the bigger question is whether this level of production is sustainable.
"None of the large steel projects like Posco have come up. Also, 'Make in India' is still at a concept stage, and industry is yet to feel its impact on the ground.
The government will have to take a concerted approach to realize this target of 300 MT by attacking the demand side and tackling the supply side as well," said R Muralidharan, senior director, Deloitte in India.
"To check imports, we will need to have anti-dumping and safeguard duties in place. To generate steel demand at home, massive investment is required in infrastructure over the next few years."
Industry watchers say that not enough is being done to create demand—be it in terms of infrastructure creation in new ports, bridges, airports, roadways, etc. In addition, the flood of cheap imports in the last 1-2 years threatens to upset the gameplan of steel companies. This is already leading to lower capacity utilization across the sector. In fact utilization rates in 10-12 industrial sectors are wallowing at 5-year lows and this is thwarting capital investment, particularly private sector investment which is estimated to go down by 8% this fiscal, according to a report by Crisil.
China's strategy to export its nearly 360 MT of surplus steel will affect every global steel player. For Indian companies, the incentive to export appears to be shrinking.
"Despite increasing global presence, Indian players have faced fall in realizations as domestic prices are derived on the basis of landed cost parity, shrinking export markets, as Indian steel has to compete with cheaper Chinese products and higher imports affecting domestic sales volume of the Indian steel industry," CARE Ratings said.
It also said FDI in the country is also likely to get affected, which will result in sluggish steel demand from end-user industries.
Source : economictimes.indiatimes.com
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