Economy

‘Economic activities will return to normal by Dec’

Suresh P Iyengar Mumbai | Updated on June 23, 2021

AMNS India exploring synergy with Uttarm Galva, says CEO

After making its mark with the acquisition of erstwhile Essar Steel, ArcelorMittal Nippon Steel India had made huge strides by acquiring an iron ore mine in Odisha and is set to buy out Uttam Galva in the near future. Steel companies have been busy catering to international demand with domestic sales weakening due to Covid-led disruptions. Dilip Oommen, Chief Executive Officer, ArcelorMittal Nippon Steel India, spoke to Business Line on the way forward. Excerpts:

Do you expect the third wave of Covid to take big toll on steel demand?

The demand is gradually picking up after initial hiccups from the second wave. The auto sector sales are moving up along with that of yellow goods. Infrastructure projects are also getting a push. These are good indicators for steel makers. Given the current developments, I think by third quarter, the economic activities will return to normal and gain momentum thereon. However, we should prepare for the third wave and ensure all preparations from medical infrastructure point of view. Vaccination must be completed soon. Adequate vaccines and acceptance of people, especially in rural India to get inoculated, must quickly improve.

How will Uttam Galva acquisition help your operations?

We are keen on exploring Uttam Galva Steel’s potential. We are evaluating commercial synergies and other opportunities to be presented by the addition of this unit’s high-value steels to our product portfolio.

Has Covid impacted AMNS expansion plans?

We are in the process of enhancing the Hazira plant output to 18 million tonnes with a commitment of ₹50,000 crore. The capacity enhancement will happen in a phased manner and in the first phase, we intend to increase it to 8.6 mtpa, then 14 mtpa with a plan to reach 18 mtpa. We have also signed an MoU with the Odisha government to set up a 12 mtpa integrated steel complex, for which the feasibility study is being carried out.

Will AMNS debt go up in India?

The liquidity and debt position of the company has been quite healthy, and we do not see any major changes in meeting our net debt targets in the near to medium term. We are focused on dual objective of debt reduction and funding growth.

Is steel sector profiteering from the economic revival amid Covid crisis?

Globally, steel prices have gone up owing to multiple reasons, including a structural shift. When steel prices in India are lower by $100 lesser per tonne compared to international market, I do not know how the industry can be blamed of profiteering. It would be advisable to look at Indian prices in relation to the global prices. When crude price spikes globally, does not that have a direct correlation to fuel prices in India? Globally, commodity prices have increased but rise in steel price in India are the lowest by far despite spiralling input costs.

Given the debt overhang, will industry think twice before expansion?

Steel is an integral part of any country’s development. Steel as an industry is very capital intensive and investments here generally come with a long gestation period. A study by NITI Aayog has recognised that domestic steel players are at a cost disadvantage of about $100 per tonne compared to their global counterparts. This needs to be addressed with favourable policies, especially for the domestic players. It is high time an NMI (national mining inventory) for iron ore is announced to remove anomalies.

Will steel industry survive on exports with lower domestic demand?

Exports peaked at 60 per cent during last year’s lockdown in India. Ever since, domestic demand has rebounded and the percentage of exports declined drastically to negligible levels in January 2021. Domestic steel demand is estimated to grow at 7 per cent per annum in the medium term. Hence, there is a need to grow capacity at a similar rate. The national steel policy envisages the country’s steel capacity to ramp up to 300 mtpa by 2030, from the current 140 mtpa. Full capacity utilisation of the domestic manufacturers would enable the companies to cater to the existing international market gaps to a certain level. AMNS India targets to increased output to 18 mtpa in Gujarat in a phased manner.

Published on June 23, 2021

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