Exports And Cost Cuts Top Priority For Indian Stainless Steel Firms.

BS reported that, with capacity expansion outpacing demand, producers need markets to stay up. Expansion in both old and new projects is set to push India's stainless steel industry into nearly a million tonnes over capacity in 2012. Indian producers will have to look for markets abroad for nearly 25% of their output by 2012.

Led by Jindal Stainless Limited's ongoing near doubling of the 0.7 million tonnes production capacity in Orissa, the industry is set to commission 1.3 million tonnes to 1.5 million tonnes of more capacity by the end of 2012. It is poised to achieve 4 million tonnes of output target in 2012, three years ahead of the original schedule set in 2008.

Other major producers, including the state sector Salem Steel plant, Panchmahal Steel, Viraj Steel and Mukand Limited, are also substantially expanding their existing units, to add 0.5 million tonnes of accumulative capacity by the end of next year.

With an estimated annual output of 2.6 million tonnes to 2.8 million tonnes, India is currently self sufficient in stainless steel production for both milled and fabricated products. The country’s consumption on Thursday is 2.6 million tonnes to 2.7 million tonnes.

Mr NC Mathur president of the apex trade body Indian Stainless Steel Development Association said that "Stainless steel producers in India will have to step up exports for at least the next two years to continue growth."

India exports mainly milled specialized steel, of 300,000 tonnes to 350,000 tonnes, mainly to Southeast Asia, West Asia and Europe. Indian producers do not export fabricated products for specialized applications.

Mr Mathur said that "We export mainly long products to overseas players. Shipment of value added flat products for use in kitchen and capital goods is still a grey area, where Indian producers should strengthen their position."

India also imports 200,000 tonnes to 250,000 tonnes a year of high grade specialized stainless steel from China, Europe, Thailand and Japan for use in automotive and other highly skilled technical sectors like watches and jewellery items.

An estimated annual consumption growth of 10% to 12% may not be adequate to absorb the additional capacity created by the industry for at least the next couple of years. Hence, these two years are likely to be tough for Indian products, an analyst said. Producers will face pressure on margin due to rising raw material cost and stagnating or lower finished products’ prices. Demand would also stabilize, with a marginal incremental rise in demand of 250,000 tonnes to 260,000 tonnes by 2014.

Apparently, China's capacity building in recent years is likely to mean an exportable surplus of a little over 2 million tonnes by 2012. With an estimated production of 12 million tonnes, consumption is set to remain at 10 million tonnes. With this surplus output, Chinese exporters may use India as a dumping ground for cheap stainless steel products, fears the industry here.

Mr Mathur hoped the demand from new applications, especially from railway wagons and coaches, LPG cylinders, cycle rims, hospital furniture, water tanks, plumbing solutions and bus bodies would partly set off the additional output.

Source : steelguru.com