WebSify
Follow us on
Mail
Print

Cars in slow lane, steel firms eye demand from auto sector

Source : BUSINESS_STANDARD
Last Updated: Wed, Sep 18, 2013 21:03 hrs

Notwithstanding the automobile sector’s slowdown, steel companies are aggressively expanding their product portfolio to cater to the demands of this industry. Examples are Steel Authority of India (SAIL), Tata Steel, Jindal Steel & Power  and Essar Steel.

They are working on developing high-grade steel for the automobile sector, currently being imported. The general slowdown has impacted the infrastructure- construction and automobiles sector, two main drivers of the steel industry. They consume, respectively, 62 per cent and 10 per cent of the country’s steel output.


Tata and Essar are focusing on localisation of automotive steel grades. A Tata steel spokesperson said it would commission a continuous annealing line to produce steels currently imported. The line is a joint venture with Nippon Steel & Sumitomo Metal. Essar Steel’s president, sales and marketing, Alok Gupta said the company was engaging with automobile customers to develop new products to replace imports. SAIL chairman C S Verma said, ”As a part of our massive modernisation and expansion plan, currently underway, we are coming up with a state-of-art cold rolling mill at Bokaro Steel Plant. This will increase our supply of CR coils to auto majors and component manufacturers. We will also be offering galvannealed steel, mainly used in the auto sector.” SAIL will also expand its service centre base to cater to cut- to-size and ready-to-use materials needed by the auto segment. SAIL also supplies specialised steel for armoured vehicles in the military.

For the first time, JSPL will also cater to auto clients once its Angul–II unit in Odisha gets ready by 2016. It is setting up a cold rolling mill in Angul, said chief executive Ravi Uppal. Jayanta Roy, senior vice-president and co-head, corporate sector ratings, Icra, said: "Steel companies are planning to offer import-substitution steel to the auto industry. The auto sector goes through cyclical ups and downs but steel being a long-gestation and capital-intensive industry, capacities have to be planned well in advance for maintaining growth.”

The specialised steel segment, including high-grade steel for the auto sector, will see more action as the high-end and niche segment should offer higher margins to steel companies compared to the commodity steel market, where competition is high, he said.

India is also becoming an export hub for the auto industry. “There is likely to be a demand-supply mismatch, with significant capacities being commissioned this year. Unless the infra and other sectors get back on track, it will be a difficult road for the steel industry in the near term,” Roy added. The companies are optimistic. “Due to India’s low vehicle penetration, need of housing and infrastructure, the slowdown is temporary in these sectors,” says Tata Steel. The company sells a little over a million tonnes of flat products to the automotive industry, which is 20-25 per cent of its total flat product sales. It supplies all three types of products — hot-rolled, cold-rolled and galvanised steel for various types of automotive applications such as skin panel, wheels, chassis and structural members.

Essar Steel’s Gupta said, “The India growth story in the long term is intact. However, currently the sentiment is bad. The government needs to take steps to bring back the favourable investment climate. Essar has made huge investment in setting up world-class facilities to cater to the demands of India’s growth and we hope the business sentiments will be back on track soon.”

”For Essar, auto constitutes for about 15% of total sales volume. Essar is also offering entire spectrum of flat steel currently to auto OEMs.

blog comments powered by Disqus
most popular on facebook
talking point on sify finance