With steel industry going through a subdued growth phase due to delays in executing infrastructure projects, the scenario looks quite uncertain. However, Steel Authority of India Limited (SAIL) is continuing with its massive expansion plan and predicts that demand, not only in India but all over the globe, will start picking up in the next few months. Chairman and Managing Director of SAIL C. S. Verma spoke to The Hindu about the company’s plans and outlook. Excerpts:
Steel demand in the country has remained subdued from some time. What is the scene now and have you revised your expansion plan in view of the same?
At the outset, I must state that the worst is over for the economy as well as the steel sector. Our expansion plans are based on the prospect for the steel sector in India defined over medium- to long-term. There is little reason to revisit that because of temporary sluggishness in the market.
We feel that the larger story of India and the steel sector remains intact. In fact, we are going ahead with the next phase of expansion, which will take our capacity to 50 million tonnes by 2025. In the next 3-4 years, India is set to emerge as the second biggest consumer and producer of steel.
How do you see this ongoing modernisation programme help the bottomline of SAIL?
The objective of our ongoing modernisation is fourfold — volume expansion, infusion of new technologies along with phasing out of obsolete ones, enrichment of product mix and capacity expansion/modernisation of captive mines for input securitisation. All these would help improve the top and bottom lines. Modernisation is being carried out simultaneously in all the steel plants of SAIL with an investment of around Rs.72,000 crore.
Investments of around Rs.6,300 crore are being made for pollution abatement and waste energy recovery systems. We are also bringing in a number of new products. One such product is long rails from new Universal Rail Mill (URM) at Bhilai Steel Plant to cater to the demand of Indian railways. With this, the percentage of value-added products would increase from 42 per cent to 55 per cent.
How do you see the infrastructure sector in the coming years, especially as steel demand depends a lot on growth of this sector?
The Indian economy holds enough promise for the future. In steel usage, for instance, consumption is only 59 kg per capita per annum as against the world average of 225 kg. Even a modest steel consumption growth of 7-8 per cent will result in additional demand of around a 100 million tonnes by 2025-26. In 2002-12, the growth in steel consumption in India was near double digit. The government has reiterated its commitment towards investment of $1 trillion in infrastructure during the XII Plan. This augers well for the steel industry.
Do you see 2014 as a year when things will change for the better, both in exports and domestic production and consumption?
Signs of recovery are already evident. There has been a pick-up in exports and some of the products which had experienced a demand slump are experiencing a demand growth. At the global level, 2014 should see recovery of demand in Europe and the U.S. It is projected that world steel consumption could grow at around 3 per cent and India’s at around 5 per cent, signalling a demand recovery.
Could you throw some light on the acquisition of coking coal assets and iron ore mines abroad on your own or through International Coal Ventures and is this the right time to buy?
International Coal Ventures Limited (ICVL) is at present engaged in carrying out due diligence of some promising coal mines and assets in the U.S. and Mozambique. One of the impediments faced in acquiring a coking coal mine abroad has been the high level of volatility in prices. Consequently, there has been a wide fluctuation in the value of assets.
The current market conditions are favourable for making an acquisition. I am hopeful of ICVL making an acquisition shortly. We are also very positive of our progress in Afghanistan and we are awaiting a positive signal from the government there on our proposal for setting up a steel plant and mining projects.
How badly has the halt of mining activity in India and are you gearing up to import and what quantity?
Stopping of mining activity in India has led to issues in availability of iron ore for the steel industry. This, in the recent past, had impacted production of plants dependent on purchased iron ore. However, SAIL sources 100 per cent of iron ore from its captive mines and is not impacted by the slowdown in domestic iron ore mining.