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 !

 

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Editorial November 2017

Special Steels’ forms an intricate but still very important sub segment of iron & steel sector. We all know that steel is an alloy of iron and carbon. Apart from its normal properties, specific applications need additions of materials like chromium, silicon, nickel, etc. to impart specific properties to steel. These special steels are used in many engineering machines but the most prominent application being in auto sector. Almost all critical parts and also many other parts inside an automobile are made of special steel components. Even the body is made of steels which have higher impact resistance. Apart from auto sector, the other customer industries include engineering, power sector, aerospace etc. Now defence sector is also opening up and offering many opportunities for special steels and their components.

Naturally, the fortune of special steels sector largely depends on the auto industry. As we have been witnessing for the last few years, this important customer industry has been going through a transition. There is added emphasis on light weight, aerodynamic model and fuel efficiency. These factors have changed their steel requirement, qualitatively as well as quantitatively. Few engine parts, which were earlier made of steel, are now being made of aluminium and its alloys. This is for the sake of reducing the weight of the vehicle. Also, many body parts are being made of composites to reduce the vehicle weight and also the cost.

The special steel producers are also responding positively to these changes. A new family of micro alloyed steels has been introduced by many producers. These steel require very less alloying additions and also eliminate the need of heat treatment thus reducing the cost. A great research is being carried out on a global level to produce light weight steels suitable for auto and similar applications.

Evolution of new technologies and processes like 3D printing and electric vehicles is likely to change not only the perception but the whole structure of this sector. There are various possibilities being discussed and debated right now but now this is certain. Manufacturing sector in general and auto sector in particular will be undergoing a sea change in coming years and this will have a great impact on the fortune of special steels producing industry.

Editorial October 2017

Ministry of Steel (Govt of India) has set an ambitious target of steel industry to enhance the capacity to 300 MTPY by 2030 from the present capacity of around 130 MTPY. There is a countrywide debate on this and many experts feel that this is unrealistic figure. On the other hand, there are many who support such optimism and feel that if the national economy continues to grow with substantial speed, this target is well within reach. Instead of taking any side, I would like to put forward few observations.

 

First of all, I would rather use the word ‘Projection’ or ‘Estimation’ instead of ‘Target’. We all know that steel is an input for a lot of industries. The basic objective of steel industry is to provide sufficient steel to other industry sectors in a sustainable manner at a reasonable price. Thus the steel demand does not lie within steel industry but depends on the requirement from other industries like infra, auto, engineering etc. Thus, rather than having its own target, steel industry should estimate the steel requirement from customer industries and and try to fulfill it.

 

Of all the industries, steel is one of the highest employer industries. It requires both unskilled as well as skilled, technically qualified manpower and even metallurgy experts. I do agree that the manpower requirement can substantially reduce due to automation and modern manufacturing processes but still there is no substitute for metallurgists. Today our country produces only few thousand metallurgists per year. Many engineering colleges prefer dropping the metallurgy stream or merge it with Material Science stream. Further, very few metallurgical engineers get excited by the idea of working in dirty environment of a steel plant and many of them change their career path. Many also prefer overseas research option over a job in a steel plant. Thus today it is very difficult to find a qualified metallurgist to run the plant. If we expect India to reach to a level of 300 MTPY by 2030, we have to see that those many metallurgists are produced in the country to run this industry.

 

Building of a steel plant is a huge and complicated project. It requires expertise from all engineering streams and there are specialized organizations that design and commission such projects. India today has only handful of such companies. Building an additional steel making capacity of around 170 MT in 13 years would require many more such project execution companies.

 

To produce one ton of steel, three tons of raw materials are required to move. Thus to produce 300 MT, we have to move 900 MT plus 300 MT of finished steel. One can imagine the kind of infrastructure (roads, rail and even sea route) required for this exercise.

 

The final and the most critical point is finance. Today many of the Indian steel companies are so much burdened with debt that financial institutions are scared to lend them further finance. Thus even if there is an opportunity, the present management of private steel companies is not in a position to expand for lack of support from financial institutions.

 

Thus its going to be a uphill task to reach to 300 MTPY level but this process would certainly help the industry to be more productive, competitive and sustainable on a long term basis.

 

 

 

Editorial September 2017

The Indian iron & steel sector seems to be in somewhat better shape now. Last few years were particularly challenging for everybody as demand seemed stagnated coupled with raw material crisis. Now, if you look at the quarterly reports of major steel companies, they have started increasing the production. Further, though most of them owe huge money to financial institutions, their position is comparatively better than the last year. Today atleast they can expect a gradual rise in the demand in coming months. The raw material crisis is also mostly resolved and the availability of iron ore, coal has improved substantially. Many experts prefer to describe such a situation ‘new normal’ instead of ‘recession’. No, its not only word play. What it means is that now one has to get used to such industry environment where making profits may not be as easy as it was before. One has to be really innovative and articulate to do so. This situation is not a temporary passing phase but a long term reality.

The world around us is changing very fast. Our industry too is feeling the heat and will be undergoing a tremendous transformation in coming years. This transformation is multi dimensional. The technologies like 3D printing are going to re – define the auto industry while technologies like robotics, cloud computing, virtual reality, augmented reality are going to completely change the way businesses are being done. I am very sure that many giants of today will face a tough time tomorrow and few of them will even perform a vanishing trick. New business models will emerge. We know today that the biggest taxi company in the world does not own a single vehicle. It was mobile companies which saw the downfall of music and camera companies. In today’s times, one should expect the most unexpected to happen.

Most of the Indian steel majors are under tremendous finance pressure and few of them are looking for buyers, invertors etc. Many companies want to expand the capacity and tap the additional demand expected to be generated but lack the support of financial institutions. Already, there is a talk of mergers and acquisitions. Looking at all this, I definitely see a big change just round the corner!

 

 

Editorial August 2017

Dear Readers,

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!

Editorial July 2017

Dear Readers,

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.

Editorial June 2017

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.