Iron & steel industry continues to have challenging times in most parts on a global level. Eurozone continues to be stagnated, Middle East region showed a little forward movement when oil prices started moving up but now with oil prices being steady at a lower level than expected, the industry and the economy in ME region seems to be halted. South East Asian countries are again witnessing a tough time. Their economies have great influence of their Chinese counterpart and now they are exposed to a dynamically changing policy situation. As we all know, now for last so many years, the key player in iron & steel sector is China. The global steel industry, material availability, pricing and other parameters are being greatly influenced (if not decided) by Chinese industry. Of late, the Chinese industry is in the process of shutting the technologically outdated plants and in the process, reduce the steel making capacity to a manageable level. Today, even their export volume is more than number two steel produces in the world. I feel if the Chinese steel capacity reduces substantially, their exports will automatically reduce. This will take away a big chunk from international trade and obviously will help to subside the pressure on regional iron & steel industries.
Indian iron & steel sector has also gone through a very challenging time for the last few years. They have seen shortage of vital inputs like iron ore, coal etc, closure of mining activity by the supreme court orders, continues demand stagnation etc. But now the situation is changing, though slowly but definitely. The demand seems to have started climbing up. This may be due to forward movement of mega infra projects in the country. Also, better road condition is facilitating auto industry growth which in turn helps the steel demand to grow. Fortunately this year monsoon is quite satisfactory in most of the regions in the country. This will have a direct, positive and immediate impact on agro equipments stector, tractor sale etc. Further, good crops will increase the purchasing power of the common man whereby helping the economic wheel to move faster. This will obviously help the steel sector to grow.
Last few years were really challenging for the global as well as Indian steel industry. The demand seemed to have stagnated in many countries / regions because of slow economic growth or even negative growth in few cases. But now I feel the situation is somewhat stabilized and the steel demand curve is slowly climbing up. Still many countries have to cover a lot of lost ground and come to normalcy.
Indian story is quite different. Its economy was seen as one of very few growing economies in the world. For the last many years, agenda of developing infrastructure has occupied the centre place and this naturally boosted the steel demand. Also, many steel business houses embarked upon huge capacity expansion program anticipating a massive growth in steel demand. Unfortunately many mega infrastructure projects were trapped for the want of land acquisition, few for the required funding etc. The steel demand could not reach to the expected point and the capacity utilization started going down. The crisis of availability of vital raw materials like iron ore and coal also added to this phenomenon.
This situation slowly changed over last two years or so. The raw material availability improved substantially. Many of the mega infra projects started moving ahead. This naturally improved the capacity utilization and has induced a new positive sentiment in the industry. The new ‘National Steel Policy’ announced by the government after numerous debates and deliberations chalks out a clear but ambitious path for the Indian iron & steel sector. India has just entered a new GST regime. This new tax regime is expected to give some relief to the iron & steel sector and I expect steel prices to soften a bit. This can trigger the demand on one hand and also help the economy wheel move faster. Let us hope that the positive sentiment in the industry continues and it heads for a bright future.
I am very thankful to Dr.Aruna Sharma, IAS, Secretary, Ministry of Steel, Government of India, for accepting our request to be the ‘Guest Editor’ of this special annual issue. I am sure her insight about the industry and her vast experience will guide the industry through the present turbulent period. I whole heartedly welcome her to the editorial team of this issue.
Iron & Steel industry is the backbone of any economy and their co-relation is quite direct and linear. This means that the fortune of steel sector depends on the general condition of the economy and is also a measure of health of any economy.
When we say that western world economy has slowed down, naturally its steel appetite has reduced resulting in lower steel consumption as well as production. In Asian region, the infrastructure building is the main agenda which requires huge quantities of steel and also other metals. This serves as a very big trigger for the regional economy.
If we look at the famous economic curve, India is at the starting point of the steep section of the curve whereas China is towards the end of this section. This means that countries like China have surpassed their best growth period and very soon their growth will be plateaued. On the other hand countries like India are about to enter or just entered the fast growth period of the economy. The next one or two decades are expected to witness a fast economic growth in India and as mentioned earlier, it has a direct co-relation with the iron & steel sector.
We all know that last 2/3 years were quite challenging for Indian steel mills. Rise in input costs, stagnated demand, shrinking exports and cheap imports had really destroyed the bottomline of many steel companies. Now the raw material situation has gradually improved, mega infra projects have started moving ahead and the steel demand seems to have started increasing. Export situation has improved a bit and most importantly the Indian government has given some protection to domestic mills in the form of ‘Minimum Import Price’ (MIP). All this has helped the industry to stabilize and expect an upward transition in next few months. The quarterly results of big steel mills announced recently manifest a similar sentiment.
Of course, this no way means that Indian steel industry is free from problems. If they have to meet a target of 300 mtpa by 2031, they have to look into and improve almost all areas including raw materials availability, land acquisition issue, demand escalation and even the availability of technical manpower.
Today, India is not even producing 100 mtpa and I know many steel mills are operating without a qualified metallurgist !
The steel consumption in the Middle East region is growing, though slowly, and there is a bit of positive sentiment in the regional economy. This may be because of partial reversal of oil price crash and re starting of few mega infra projects in the region. Further, it was generally felt that the region is a soft destination for dumping of steel as no government has imposed any anti dumping duties on any of the importing countries or mills. Arab Iron & Steel Union, in order to protect the regional industry, has been advocating for such measures for a long time but as per the governments of many countries, this is against the principle of free trade adopted by the region long time ago. Today the Middle East region is a net importer of steel and off late, India has been able to export substantial amount of flats and GI to this region, may be due to cooling down of China and improved price viability. It was also discussed that if India’s steel making capacity does not rise substantially in coming few years due to land acquisition and environmental issues and if the Indian economy continues to grow at a decent speed, there is going to be scarcity of steel in the country. This situation may arise post 2020 and may provide opportunity to the Middle East steel mills to export to India. These were the few points discussed at ‘4th Indo Arab Steel Summit’ held recently at Dubai.
Another high profile event was ‘India Steel 2017’ held jointly by Ministry of Steel and FICCI at Mumbai where one could sense a lot of optimism around. Industry leaders like T.K.Singh, P. Madhusudhan, T. V. Narendran, Naveen Jindal displayed a lot of confidence regarding the steel demand, Greenfield and brownfield expansions and India’s economy in general. Hon’ble Minister of Steel Choudhary Birender Singh and Steel Secretary Dr. Aruna Sharma too assured the industry to work hard for the removal of bottlenecks being faced by the industry.
Admist all this positivities, I have to make one point. Ministry of Steel has set a target of reaching 300 MTPA capacity by 2030. First of all, is the word ‘target’ correct? We have to remember that steel is not the final product in the process chain but is input to other industries like construction, auto, white goods, engineering etc. The steel requirement of the country depends on the growth of these user industries and it should be estimated accordingly.
Setting high targets without proper analysis of user industry growth prospects would result in creating unviable overcapacity, isn’t it ?
Middle-East is seen as one of the fastest growing regions in terms of steel consumption, thanks to the infrastructure development and construction activity all over. The region is net importer of steel and CIS, Turkey, China, India are the preferred suppliers. During 2009 meltdown, the regional economy did get a jolt and the developmental activity drastically reduced followed by reduction in steel consumption. The region gradually stabilized in terms of industrial activity, infrastructure projects and the steel consumption also rise slowly. The Middle East and the North African region, commonly known as MENA, is considered to be one of the fastest growing regions as regards industrial and economic activity. The oil price crash had reduced the pace of the economy but now with gradual increase in oil prices, the industry sentiment is also turning positive. As such the region offers tremendous opportunities on a long term basis.
Middle East region has been a traditional and one of the most important trade partners for India and it is true for iron & steel industry as well. The common items exported from India include ferro alloys, billets, HR & CR coils, steel pipes, steel plant equipment and even skilled technical and managerial manpower. India imports iron pellets, TMT rebars, scrap etc. Many Indian executives are working in various steel producing and processing plants in the Gulf and helping the regional economy progress. Also, a lot of entrepreneurs from this region are exploring the possibility of investing and participating in the growing Indian economy.
Indian iron & steel industry is also going through a lean period. The demand is not going up as expected and the capacity utilization of Indian mills is not very impressive. Thus the deficit in the Middle East steel production and the low capacity utilization of Indian mills can very well compliment each other. Of course, other suppliers are already present in that market and there will be very stiff competition.
Mind well, exports are not to be seen as a short term opportunity. It cannot and should not be a filler till the time domestic demand and price improve. It has to be a sustained and a long term policy. Then only one can really boast to be a global supplier !
Last few years have been really testing ones for the entire iron & steel vertical. In most parts of the world, the finished steel demand seemed to be growing slowly or stagnataed, especially in the western world.
This millennium saw the emergence of Asia as the growth engine of the world for manufacturing and infrastructure industry. It consists of the regions like Indian sub-continent, China, SE Asia and the Middle East. All these regions are extremely promising in terms of manufacturing sector and infrastructure development projects. With China producing and consuming more than half the quantity of finished steel produced in the entire world, naturally the focus of iron & steel industry slowly shifted to Asia. In other parts of Asia, numerous infrastructure projects were successfully implemented which consumed a huge quantity of steel & metals.
Today, world’s growth engine seems to have slowed down. China is trying to close down the outdated capacity, Middle East region’s infra projects getting on hold due to depressed oil prices and liquidity crunch and SE Asia not showing the expected growth rate of the industry. Overall the situation is far from satisfactory. India has its own set of problems. The present government till now could not pass the land acquisition bill which would have facilitated Greenfield expansion programs of iron & steel sector. This situation has in a way restricted the free growth of iron & steel sector in the country. Two years back it was non availability of iron ore which was the main hurdle in the industry’s growth. The Supreme Court had imposed ban on the iron ore mines in the states of Karnataka and Goa which drastically affected the availability of this vital input. Now, even if the availability of iron ore has improved, it is the demand stagnation which has emerged as a new problem. The capacity utilization of Indian mills has improved from last year but still in my opinion the average may not exceed 75 %. Needless to mention that such low average would also affect the bottomline and put severe pressure on finances.
Overall its testing time for iron & steel sector, globally, in Asian region and in India too !
Since last several years, MENA region has caught attention of global business community. The reason was very simple. We all know that infrastructure building is the strongest booster to the economy of any region. MENA region is undergoing this process for the last several years and naturally the companies associated with this sector are attracted to this region. Steel sector is the biggest supplier to infrastructure building and fabrication industry and thus the steel appetite of the region grew substantially. As such this region is big net importer of steel and will remain so atleast for the next few years.
The region got its first setback in 2008/9 when global or rather western world meltdown happened. This was because economies of many countries from this region were thickly linked with developed world economies. The region was still promising and importantly, when most of the regional economies were collapsing, MENA economy was still out of the red. It started climbing gradually after the meltdown effect subsided. Experts argued that falls are always sudden and the climbs are gradual. Everything seemed alright till the oil price crash happened around two years back. This directly hit most of the Middle East countries and had a strong negative impact on liquidity position and eventually on the fate of ongoing infra projects.
Now, since last few weeks the oil prices have started firming up a little and this development has imparted some positivity in the system. Infrastructure industry is hopeful that the liquidity position of regional economies will improve which will give a forward push to halted projects. If this happens, it will give a boost to steel demand of the region. But mind well, these are only expectations and not a reality yet.
Today, the major steel suppliers to Middle East region are China, Turkey, CIS etc. The import basket comprises of construction steel longs, semies, HR coils, pipes for oil & gas industry etc. India too has a sizable steel export to this region but there is a vast potential for growth. In my opinion, next few months are very critical for this region and will set the direction as well as the pace.