For the last few years, global Iron & Steel sector is passing through a rough period and the same is true for Indian steel sector.
On a global level, demand stagnation is the major concern. The developed countries and regions have already reached a plateau as far as infrastructure development is concerned. Thus their steel appetite is naturally low. In other parts of the world like Asian region, availability of raw materials and availability of finance coupled with demand stagnation is the issue.
In Indian context, for the last few years demand stagnation along with raw material crisis restricted the growth of Iron & Steel sector. It affected vital parameters like demand growth, bottomline, capacity utilization etc. All this resulted in value erosion and placing many companies in the red.
Now the situation has started tilting towards positivity and there seems a slight increase in the demand, a huge increase in industry sentiment due to good monsoon in most of the parts and some forward planning too. Nobody doubted India’s growth potential on a long term basis but till now the ground reality was not supporting this thoughtline. Now with slight increase in demand and somewhat better performance of steel mills, there is a huge optimism in the industry.
Unfortunately financial institutions have a different take on this. As per them, they have invested very big capital in the Iron & Steel sector out of which sizeable part has become or on the verge of becoming NPA. Further, steel Industry is subjected to cyclic ups and downs which are very difficult to absorb. Lastly, even in best of the times, the margins of the industry are not so attractive when compared to other verticals like IT, Biotech etc. Thus it is very difficult to support this industry beyond a certain point.
In such a situation when the industry is looking up, and needs capital for further capacity expansion, we have to find some solution bringing all the stakeholders together. National Steel Policy has set a very ambitious target of enhancing the steel making capacity to 300 MTPA by 2030 from the present one at around 130 MTPA. It’s a huge task and requires support from every corner, the most important being from financial institutions!