Editorial September 2018

In 2017, Indian economy was shadowed by demonetization in the first half and the implementation of much awaited GST. As mentioned in my last piece, one may debate on the long term utility of these measures but on a short term basis the economy did get a big jolt. Organized part of iron & steel industry did not get much affected by demonetization and infact it gained a little bit from GST implementation. Now in 2018, Indian economy seems to have recovered from these tremors and is cruising forward. The GDP growth rates of the first two quarters of 2018 (7.5 % and 8.2 % respectively) are quite encouraging for the economy as well as for the iron & steel industry. A good GDP growth rate always encourages the industry and in turn helps the steel demand to rise.

If one looks at the user industry sectors of steel, there too a positive sentiment is prevailing. Infrastructure sector which consumes maximum steel, is growing at a steady speed. Many mega projects have now shifted from drawing boards to the sites. They are expected to give a big boost to steel demand in the country. As regards construction, one may develop a feeling that it is stagnated in big metros. Yes, it may be the case but look at tier II and Tier III cities. They are growing at amazing speed and eating lot of steel in the process. Auto industry too is growing at a decent speed and creating a good demand for flat steels (body) and long products (auto parts). Of course experts feel concerned about the auto steel demand on a long term basis when electric vehicles will be popular. In any case, today all seems to be well.


Today, one of the major concerns of the industry is rising oil prices. It makes the transport more costly and affects all the products, industrial as well as household. As we all know, for producing a tone of steel three tones of raw materials are required. Thus in totality, four tones are transported. With these facts in mind, one can imagine the impact oil price rise is going to have on iron & steel industry.

If the industry has to progress, technology should provide the push and the direction for this transition. For the last few years, we have been talking about automation, robotics in steel sector. Now the concept of ‘smart manufacturing’ or ‘industry 4.0’ is getting popular. With implementation of this, one can not only monitor but also effectively and efficiently manage his factory by using an app on his mobile phone. I feel now is the time Indian iron & steel industry should look for such technological upgradation so as to improve on quality, productivity and overall efficiency of the plant.


If the industry has to progress, technology should provide the push and the direction for this transition. For the last few years, we have been talking about automation, robotics in steel sector. Now the concept of ‘smart manufacturing’ or ‘industry 4.0’ is getting popular. With implementation of this, one can not only monitor but also effectively and efficiently manage his factory by using an app on his mobile phone. I feel now is the time Indian iron & steel industry should look for such technological upgradation so as to improve on quality, productivity and overall efficiency of the plant.

Editorial August 2018

The iron & steel sector in India seems to be slowly gaining momentum. Finished steel consumption and demand are growing steadily which is reflecting positively on capacity utilization of steel plants. The price curve too is showing a gradual increase which means the conversion margin at every stage is reasonable.

Though steel user sectors such as infra, construction, auto, engineering are putting up impressive performance month after month and are providing support to the demand curve, in my opinion, this is not enough to have a sustainable growth. The real and biggest trigger for steel demand comes from mega infra projects undertaken by the centre or state government and this has not yet picked up as expected. Still the overall capacity utilization of Indian plants is below 80 % and there is a lot of ground to be covered.

Steel Ministry has made a projection of steel making capacity to be enhanced to 300 mtpa by 2031 from the present level of around 130 mtpa. This also means that with around 80 % capacity utilization, the steel production has to reach to 240 mtpa from present level of 102 mtpa. On consumption front, if the Indian economy grows by near double digit rate, then the steel consumption can rise to that level but it is not only consumption estimate which will decide the fate of such ambitious projection. The whole system has to gear up to that level. The raw materials, plant equipments, plant builders, logistics, technical manpower, everything has to increase three times the present level and this is a real huge task and challenge. A lot of technological upgradation is also needed at various stages in iron & steel making and for that purpose, our R & D institutes have to gear up. India has a great history of metallurgical advancements but unfortunately in the present era, we are lagging behind the developed world in this very subject.

On policy front too the industry needs support. Firstly, land acquisition bill. Unless it is in place no Greenfield expansion is possible and as we all know brownfield expansion has land limitations. Industry is struggling to get this bill passed by the parliament but till date the issue is fluid. Further, because high cost of power and finance, Indian steel price can be never competitive in a global marketplace. Now, these are old issues but still not resolved. One has to understand that steel prices do have a big effect on a lot of industry verticals and by making it higher, we are putting the viability of not only steel but many other industries under question. One more issue is logistics support. We all know that to produce a tone of steel, four tones have to be moved. It is government’s responsibility to provide logistic support (roads, rail and sea route) I do agree that the process of building the infrastructure is being carried out with a great speed in last few years but still a lot of ground is yet to be covered. Unless infrastructure is in place, iron & steel industry cannot progress. Something has to be done about it.

Overall, I am quite bullish on the fortune of Indian iron & steel sector and would certainly bait my money on it !


Editorial July 2018

Today, India is the fastest growing economy attracting many international companies, financial institutions etc. It is natural that these companies would want to participate in the growing Indian economy. The fiscal 2017-18 was shadowed by currency ban first and then implementation of much awaited GST. One may debate the long-term necessity of these measures but its tremors felt immediately by the economy. Thus last fiscal performance of Indian economy was somewhat depressed. But now the industry and the economy seems to have recovered from the jolt and look, last quarter growth of Indian economy was 7.5 %. Further, it is expected that GDP growth for the next quarter will be better than this. This is surely a very encouraging signal for the economy as well as the industry. It also ensures a positive industry sentiment and an attractive environment for overseas companies and capital.

Here is a catch. A good GDP growth is good but not enough for a healthy growing economy. Let me explain this. GDP only tells you how much the economy has earned but it does not tell you who contributed to this earnings. Thus a handful big companies doing superlative performance may boost the GDP while rest of the economy may still be struggling. I think the Indian growth story is somewhat similar to this. Few mega companies are doing extremely well while most of the other companies, especially from MSME sector are fighting for survival. We all know that MSME sector is the backbone of any economy. It rolls the maximum capital and it generates maximum employment. Unfortunately this very sector is struggling for its existence. Stagnated markets, no access to soft capital, severe competition especially from China. This is the reason why Indian GDP growth is not accompanied by a similar growth in the employment index.

The situation in Indian steel industry is bit different. Here, the big ones are facing big problems (of course with few exceptions) and the small ones are sailing comparatively smoothly. I do not mean they have no problems but then one has to accept the cyclic nature of this industry. The secondary steel producing companies, somewhat smaller than the big ones, have emerged as the most important and relevant segment within the iron & steel sector.  They are contributing highest in terms of tonnage and also the employment generation. These mid cap companies are indeed the backbone of Indian steel industry.

Editorial – June 2018

Last year was quite eventful one for the Indian iron & steel sector, full of ups and downs and filled with enormous uncertainties. Let’s have a look.

Though the availability of vital raw materials has improved over past 2/3 years, depressed oil prices and overall subdued environment on a global level has to have its effect on every country’s economy. In today’s networked world, no country can progress in isolation. India too was affected by the global slowdown which has now been referred to as ‘New Normal’.

Nevertheless, India’s auto sector has been putting up an impressive performance for the last few years and continues its upward path this year too. We all know that only about 12 % of steel produced in India goes for auto industry and majority (about 60 %)is  consumed in infrastructure building. Thus it is evident that the fortune of iron & steel industry in India is firmly tied up with the infra and construction sectors. Building of roads, bridges, ports, airports, metro projects, dams etc. will consume huge amount of steel and thus will give a boost to steel demand in the country. For India, most period in the last year was under the influence of demonetization and implementation of newly framed Goods & Services Tax (GST). Though one can argue on the long term benefits of these steps, they naturally affected the performance of atleast first three quarters of the fiscal 2017-18. The industry somewhat recovered and stabilized by the end of 2017 and thus the Indian economy grew at the rate of 7.5 % during Jan-Mar 2018. Further, during this period the steel industry went through a huge transition as regards financial and ownership restructuring. This uncertainty too played a sizable role in slowing down the pace of the industry.

Now that the Indian steel sector has crossed most of these hurdles in the growth path, one can be little more optimistic for the coming period. Also, the central government’s focus on MSMEs and Steel Ministry’s efforts to upgrade and help secondary steel sector should put the Indian mills in a position to cater to the growing steel demand in the country. As such India is seen as one of the few growing economies in the world and a lot of overseas companies want to enter into this growing market. I feel that India is in the right place at the right time. Only time will tell how much benefit it can extract out of this situation !


Editorial May 2018

As we all know, majority of steel produced all over the world is mild steel, I mean it is non alloy steel. It is used extensively in construction activity and infrastructure projects. When the steel / steel components are required to possess special properties, specific alloying elements are added at the time of melting. These special steels are used for intricate applications such as automobile parts, engineering equipment, springs, bearings, fastners etc.

Special steels industry in India has come a long way. conventionally mini steel plants employing electric arc furnace supported by LRF used to produce such steels. Capacities of such mills used to be small and even the demand was limited to mostly automobile sector. This scenario started changing after Indian economy adopted liberalisation and globalisation as its basic philosophy. Many overseas automakers set up their manufacturing / assembly lines in India. The then Indian government made it mandatory for these automakers to gradually shift to Indian auto components. This gave a big boost to Indian auto component industry and naturally demand for special steels increased substantially. Many big steel plants started producing these value added steels to achieve higher turnover and profits. Let me caution you, special steels production requires thorough knowledge of metallurgy and very tight control over the process and parameters.

Today, almost all the major international automakers are present in India. The auto sale in India has been increasing continuously for the last few years and it is expected that this trend will continue for some more years. Further, special steels demand is increasing in the sectors like power plants, engineering, infrastructure etc. For the last few years, Indian government has been trying to reduce its dependence on imports in the defence sector. This is opening up huge opportunities for special steel applications in this so far untapped industry. This is the reason along with the traditional scrap + sponge based mini steel plants, a lot of integrated plants are also entering in the special steels business.

The only threat to special steels sector seems to be from electric cars. It is expected that Indian roads will be crowded with these cars in next decade or so. If this happens, the vehicle will no more require today’s complicated engine and the demand of special steels may reduce drastically. It is also predicted that such cars will take many  years to develop supporting infrastructure for the usage of such cars. Let’s see how the future unfolds !

Editorial – April 2018

Indian economy has witnessed two tremors in the last one or two years. One was demonetization and the other was introduction of GST, Goods & Services Tax. While demonetization was intended to nullify the fake currency and to curb cash economy, GST’s purpose was to bring the whole nation under one tax regime, avoid double taxation and collect the tax at the point of sale. The thought behind these two moves was said to be making Indian economy more straight and more attractive for overseas investment. While one can debate the extent of fulfillment of these objectives, it is really creditable on the part of Indian economy which successfully withstood these tremors. Its growth rate for the fiscal 2017-18 was around 6.5 % and it is predicted by the international agencies that Indian economy will grow by around 7.5 % in the fiscal 2018-19.

We all know that the steel consumption is directly related to GDP growth rate and thus the consumption grew decently in 2017-18. Now if Indian economy speeds up in coming months, the consumption curve is also going to shoot. Infrastructure and construction are the two foremost important consumers of steel and they seem to be doing well. Another important customer is auto industry. It is undoubtedly doing well for the past few quarters. All these factors do make us believe that Indian iron & steel industry will be doing better, quarter after quarter. The raider in this thought process  is that the steel consumption is sure to grow, If Indian producers are unable to take advantage of this situation for their own (financial or management related)  reasons, then the country may turn into a long term importer of steel.

Here, we should differentiate between the large integrated steel business houses and medium scale steel plants. The financial and ownership restructuring problems are faced by these large business houses while the medium scale plants are in a perfect position to exploit this situation. This is evident from the reactions of steel veterans from Chhattisgarh published in this issue. In the past few years, Chhattisgarh has become the biggest steel producing state in the country and Raipur has emerged as the ‘New Steel Capital’ of India.


Editorial – March 2018

Indian iron & steel industry is going through a big transition. On one hand, the demand curve is going up suggesting that it is the right time to think about the capacity expansion, and on the other hand, Indian steel business houses are surrounded by financial crisis. Most of them have huge amount of debt on their head and are not able to service it. Banks and financial institutions have raised their hands and are not willing to give any debt restructuring package to these sick companies. They have rather opted to auction the assets of these companies and recover whatever they can. The common perception about these companies is not very positive and many believe that the promoters have themselves siphoned the money and made these companies sick !

Apart from this financial crisis and ownership restructuring, the industry seems to be doing well on operational front. As mentioned earlier, the steel demand is increasing steadily; thanks to infra projects like bridges, ports, airports, metros etc. and also to the decent performance of other user industries like automobile, transport, construction, engineering, consumer durables etc. The capacity utilization figures of various plants are also becoming better. The raw material crisis erupted few years back is now more or less resolved. The availability of iron ore and coal has sufficiently increased for the seamless metal production.

The other major issue facing the industry is non availability of technical manpower. Ministry of Steel (Govt of India) has announced a target for the capacity creation of 300 mtpa by 2031. This means an increase of around 170 mtpa capacity from the present level of 130 mtpa in just 13 to 14 years. Rather than commenting on whether this target is achievable or not, let us ask ourselves few questions. Do we have sufficient companies to build these steel plants? Does our education system produce those many metallurgists and other technical manpower to run an industry producing 300 mtpa? Is our raw material industry geared up to supply that much quantity to produce 300 mtpa of steel ? To produce a ton of steel, approximately three tons of raw materials have to be moved. Is our transport system geared up for the movement of 1200 mtpa (comprising of raw materials and finished steel)?

Irrespective of whether India achieves 300 mtpa steel making capacity building by 2031 or not, I strongly believe that Indian iron & steel sector has a bright future and we all have to start gearing up for that!



Editorial – February 2018

Today, Indian steel industry is on crossroads. A lot of opportunities are emerging and at the same time, it is surrounded by numerous problems.

Last few quarters have seen a steady increase in steel demand, thanks to mega infra projects being implemented by the central as well as many state governments. A sustained increase in steel demand can transform the industry sentiment and encourages steel business houses to plan for the future, think of capacity expansion and so on. It also improves the bottomline and influences the price curve in a positive way. Presently, most of the commodities in the iron & steel process chain have somewhat regained the comfort in pricing which can ensure smooth running of the enterprise and expect some growth in the future. The customer industries like infrastructure, automobile are putting up impressive growth figures and this will surely translate into higher steel demand in coming months. Recently presented union budget for the fiscal 2018-19, apart from its provisions for the farming sector, emphasizes on infrastructure development in the form of railways, airports, sea ports, metro projects etc. which certainly promises bright future for steel industry. It also estimates that Indian economy will grow by 7.2 to 7.5 % in this fiscal. I am sure if the economy really grows with this rate, all the industries including ours will tremendously gain. It can attract huge capital not only from India but from every corner of the world.

Many big steel companies have heavy debt burden and unfortunately are not in the position to exploit the full advantage of the present industry situation. In fact this financial situation has initiated restructuring process in the industry and few private steel plant promoters face a threat of being out of job. We all know that this is a very complicated process involving plant and financial valuation, brand value estimation and so many other parameters. My point here is that the enterprise is loosing a great opportunity of recovering its financial position. Can the government and our ministry do something about it?

To say so, the future seems bright but the journey is corrugated. Let’s see how the things unfold !

Editorial Steelworld 2018

Since last few years, MENA region has been identified as one of the fast growing economies of the world. This growth story started around turn of the century and had a smooth run till 2008 global economic meltdown. Many economies in the developed world suffered a big jolt and since the economies of many countries in MENA region are closely associated with western world, they also felt huge tremors. Infrastructure creation was at the core of this economic growth and due to crunch in liquidity, many infra projectes were halted. The steel demand suddenly dived down and many enterprises associated with this industry witnessed a huge setback, few had to even down their shutters. Many jobs were lost.

All of us know that the collapses are sudden where as the growth is always gradual. The region also started gaining back the lost ground. Slowly the infra projects re started and the steel demand started recovering. Oil price crash happened around 3 years back and it had a similar impact on infra projects and steel demand. Now the oil prices are somewhat better which has improved liquidity situation to some extent. Naturally, the steel industry and the economy in general are on recovery path.

Another factor which has been impacting the economic activity is political instability. The region has been unfortunate on this count and few countries in MENA are going through political instability which is adversely affecting the economy and the industry.

In spite of all these ups and downs, MENA region still offers great opportunities for steel business houses around the globe. It consumes substantial quantity of steel mainly for its infrastructure development needs. Thus steel raw material suppliers have a sustained interest in this region. Further, the region consumes far more than its production capacity and imports the rest. The main suppliers to this region are China, Turkey, CIS countries etc. Till now there was no import barrier to GCC countries but now the governments of few countries are in the process of imposing import duties to protect the domestic industry and to keep the price balance intact. On the other hand, new steel projects are being conceived and implemented to bridge the gap between the consumption and the production.

Overall, I feel that MENA region offers a tremendous opportunity for iron & steel industry and I look forward to a vibrant, growing and sustainable industry in coming time !

Editorial December 2017

The efforts for finding the alternate fuel are going on for last many years. If we look back, last 40 years saw a steady rise in the consumption of fossil fuels like oil, coal. The oil deposits in the Middle East region changed the fortune of many countries in that region. The infrastructure growth happened in this region was possible only because of the earnings through the oil trade. Today also, many such projects are being funded in a similar way.

Last few years, there has been an exhaustive brainstorming and research by scientific community over the issue of alternative sources of energy. A lot of breakthrough technologies were developed in the areas of solar and nuclear energy, which are supposed to be green energy sources. They do not emit poisonous gases like in the case of a thermal power plant or a oil refinery.

These developments may seem far away from iron and steel industry but it is far from the truth. Our industry will be directly impacted by these developments. Firstly, the global oil demend may not rise in coming years. Infact it may reduce a bit. This situation may depress the oil prices or atleast prevent any rise. This will have an adverse effect on liquidity of many countries and will not only slow down the economic wheel but also slow down the pace of infrastructure development in many regions. This will obviously reduce the steel demand. Secondly, when electric vehicles become popular and affordable, their steel requirement may come down drastically. The body may be made by composite material and today’s complicated engine using numerous steel components may be replaced by a simpler version.

These are my thoughts on what may happen on a long term basis and not in near future. Nobody can exactly predict the future but can imagine visualize certain situations. One has to take these thoughts in that spirit !