‘Stainless steel demand looks up as govt pushes for sustainability’

In FY23, our sales volume stood at 17,64,405 tonnes and the first quarter of the current fiscal year has also seen a decent growth in both domestic and export markets, notwithstanding the global uncertainty. Hence, we are hopeful that the demand for stainless steel will continue to grow. Also, with our increased melt capacity of 2.9 million tonnes per annum following the one-million-tonne stainless steel melt shop capacity expansion in March, we expect over 20 per cent volume growth in FY24 from FY23.

Yes, so far as the domestic market is concerned, the future looks promising. A major driver of this growth is the end-user industry demand, which is buoyed by the government’s push towards sustainability solutions, including infrastructure spending. The budgetary allocation of Rs 10 lakh crore for infrastructure development will drive demand for stainless steel in the mid-term. Domestic stainless steel demand is expected to see CAGR of 9 per cent, as per a Crisil report in March. This is double the growth of 4.5 per cent registered in recent years. We have seen an uptick in application of stainless steel in the country, making inroads into diverse industries. Stainless steel demand is projected to touch 20 million tonnes by 2047 from 3.6 mt currently.

Buying activity worldwide cooled and prices declined in the latter part of the first quarter. Several mills are already operating significantly below optimal capacity and could make further production cuts. Looking at the current trend in the global markets and muted demand along with weak price sentiments in the EU and US, we are expecting the export share to be nearly 15 per cent (against 13 per cent in FY23) of our total sales volume. This number may increase as the condition of the global economies improves. Our diversified product mix can help us cater to the domestic market in order to minimise the impact of a global economic slowdown. Simultaneously, we are developing new markets in countries such as South Korea, South America, Middle East and Australia, so that we are not highly dependent on any particular market.

This is a billion-dollar question in the context of a globalised trading environment. In India, inefficiencies of high cost of capital and logistics mar the competitiveness of various industries, including manufacturing. For some global players, the situation is the exact opposite. They have an efficient water and land logistics and a mature energy and infrastructural framework. This apart, they also get government subsidies on land. These sops provide them undue advantage compared to Indian companies in global markets. Having said that, Indian companies have an edge in manufacturing capabilities. This is precisely why Indian players are preferred when they compete at a global level.

Within a capital-intensive modern manufacturing environment like ours, internal operational efficiencies are at par with the global best practices. Despite India’s lack of nickel reserves, low scrap generation in our country, and high costs of logistics and capital, we are still competing with the world’s largest producers on both quality and cost parameters. In fact, the challenges that the Indian industries face render the ‘Make in India’ initiative unsuccessful by 8-10 per cent, and is the basic reason why the government’s initiatives such as Gati Shakti are being initiated (to reduce the cost of logistics). However, it remains exceedingly difficult for any country to compete with Chinese products, which benefit from substantial subsidies in terms of input costs.

China has a history of exporting subsidised products by leveraging its surplus capacities, leading to instances of dumping in many countries. The business practices deployed by China have already attracted global attention and concern. In the stainless steel and steel sectors, numerous producer countries have imposed tariffs on Chinese imports to create a fair and level-playing field for domestic players. India is not exempt from the potential threats posed by China. However, there is optimism that the Indian government will acknowledge and undertake appropriate measures to bolster the manufacturing sector and safeguard its interests. If safeguard measures are not taken, more imports will flow into India and hit the homegrown stainless steel industry hard. More so because as much as one-third of consumption for FY23 was met through imports, which was led by China. From FY21 to FY23, imports from China and Indonesia witnessed a steep increase of 318 per cent and 158 per cent, respectively.

Majority of our products are in the value-added segment. The onslaught of imports has necessitated us to revisit and diversify the mix to maintain our relevance. It is worth noting that all the dumping from China is coming in the vanilla grade. In last 25 years, the dominance of household goods as a consumer segment has declined from 80 per cent to 44 per cent with other sectors as major consumers. The prevalence of lower import prices has negatively impacted the overall market, including us.