As the domestic auto market speeds up to become the sixth largest worldwide, steel makers such as Tata Steel, JSW, Essar Steel and Steel Authority of India Ltd (SAIL) are gearing up to cater to the surge in demand.

Though a large portion of the steel used for manufacturing vehicles is currently imported, steel makers are now investing heavily in fresh cold-rolled (CR) steel, used by the auto and white goods sectors. The gross demand from the auto industry - the second largest (after construction) at nine per cent of steel consumption, is expected to cross 10 million tonnes per annum (MTPA) by 2016, from the current 6.7 MTPA.

“With all major car manufacturers setting up new production facilities to cater to both the domestic as well as export markets, India is likely to become a global manufacturing hub very soon. Neither SAIL nor any other major steel producer can afford to overlook such an important sector,” Mr C S Verma, Chairman, SAIL told Business Line.

In the current fiscal, the state-owned firm will add a new CR Mill of 1.2 MTPA capacity at its Bokaro plant. Overall, it aims to increase hot metal capacity to 20 MTPA this year from 13.8 MTPA.

Essar Steel, whose expansion to 10 MTPA from 4.6 MTPA is to be completed this year, said that its new capacity is flexible to cater to the auto sector’s increased demands.

“Indian automobile industry has one of the strongest economic linkages with steel and has a very strong multiplier effect. We supply around 20 per cent of our total sales to all major passenger, commercial vehicle and two & three wheeler manufacturers in India,” said Mr Vikram Amin, Essar Steel’s Executive Director-Strategy & Business Development.

Tata Steel is also increasing CR steel capacity by 20 per cent to 1.2 MTPA, this fiscal. It supplies over 40 per cent of the domestic steel sourcing for the automotive industry. Meanwhile, JSW said earlier this year that it would set up a 2.3 MTPA CR mill at its Vijayanagar facility, the initial phase of which will be ready by the first quarter of 2012-13.

Technical tie-ups

In order to gain expertise to make higher grades of steel, companies are also entering into technical tie-ups with global steel makers. Improved grades such as high-strength steel, is needed by automakers to reduce vehicle weight and maintain structural rigidity. While JSW has collaborated with JFE from Japan and Essar with Kobe Steel, Tata Steel has a joint venture with Nippon. SAIL is also in talks with both Kobe and Posco for auto-grade steel.

No capacity delay

Though automakers are worried over the sales slowdown in the first four months of the fiscal, this does not reflect in the steelmakers’ investment plans.

“SAIL’s modernisation plans shall not be affected at all by this temporary slowdown in auto sales,” said Mr Verma, while Essar Steel’s Mr Amin added, “this is a temporary blip and long-term prospects of the Indian auto sector remains robust.”

>roudra.b@thehindu.co.in

comment COMMENT NOW