India may be one of the world’s largest economies by GDP, but our per capita steel consumption is very low.
Joining hands with Japan’s Nippon Steel, NRI billionaire Laxmi N Mittal-led ArcelorMittal acquired Essar Steel through the insolvency route in December last year. The joint venture, AM/NS India, has plans to enter into manufacturing of long products. Dilip Oommen, AM/NS India CEO, and also president of Indian Steel Association (ISA) shares with Surya Sarathi Ray his views of the potential growth of the domestic steel industry and his company’s objectives. Edited excerpts:
How has Covid-19 impacted AM/NS’ India plans? What is your outlook on steel demand and price?
Covid-19 is an unprecedented global crisis. Even though the lockdown started on March 24, there was a quantum jump in performance in Q4FY20, year-on-year. The first quarter of 2020-21 has also been quite satisfying considering the pandemic, lockdown and slowdown in the economy. Since June, we are running at full capacity. Domestic demand is reviving with rural economy taking the lead. Domestic sales are certainly not a substitute for exports.
Steel is front and centre in India’s recovery, a point that we, representing the ISA, have placed before the steel ministry and the government for uniform policy implementation for the sector. Infrastructure projects must be front-loaded to further speed up the economic growth and steel consumption.
We do not plan to get into manufacture of long products immediately. In future, we may consider it.
Is there a plan to set up a plant in a state with high mineral deposits for long products?
The Gujarat government has been providing a lot of support to industries. . I am sure the state will provide the right environment. I must say that Odisha and Andhra Pradesh, where we have pellet facilities, have also been very supportive, especially during the Covid-19 crisis. The second pellet plant will come into operation in Odisha in another six months, taking our pellet capacity in India to 20 million tonne. We already have acquired two mines to meet our iron ore requirement partially.
As the head of Indian Steel Alliance, how do you see the association’s role, especially after Tata Steel’s exit?
The vision of ISA is to work towards transforming the Indian steel industry as a responsible global leader acclaimed for its competitiveness while focusing on health, safety and environment. This is a collective approach and we will try our best to take steps for the betterment of the industry at large.
India may be one of the world’s largest economies by GDP, but our per capita steel consumption is very low. We simply do not use steel in the multiplicity of ways that is common in a developed economy. That must change if we are to grow in commercial and value terms.
Yes, one of the key tasks is to bring back Tata Steel into the association and we are in consultation with them.
You have been batting for border adjustment tax , but going by the total value of imports in June, 56% were those products which are available domestically and are the most basic products such as scrap. Doesn’t it indicate that domestic prices are at an elevated level or is it a case of dumping?
Indian steel manufacturers bear multiple local taxes — electricity and cross subsidy duties, clean energy cess and royalties on ore and there are more. There is no input credit available. These taxes make up 12% of the price of steel. In rival markets, these levies either do not exist or are comparatively lower. So, Indian steel is subjected to unfair competition even before it leaves our plants. So, if taxes are reduced or BAT introduced, it would create a level playing field. For the same reasons, the export incentives also need to be enhanced. The steel ministry shares these concerns.
India’s steel exports have more than trebled in just three months to stand at 1.55 MT in June, mainly due to higher volume to China. Since China is ramping up production, will this trend continue for months to come? Or is just a temporary phenomenon?
Indian steel’s guiding light is a steel ministry vision of 300 MT of capacity by 2030. We are currently at about 138 MT. The pandemic will put additional pressure on this target. Recent stimulus packages as well as monetary policy adjustments to improve liquidity and credit for MSMEs, reflect the enormity of the challenge. But, the Indian steel industry has to be more competitive, enhance the overall export ratio, and government can support the endeavour by creating a level-playing field in the sector. Export incentive must be enhanced to make us more competitive in the international market and BAT in the domestic market. In spite of many such odds, exports formed a significant portion of sales in Q1FY21. The exports to China will come down in the coming months. Right now, they are importing because of the price arbitrage.