THE SUCCESS RUN OF INDIA’S STEEL INDUSTRY

According to a report published by India Brand Equity Foundation – an Indian government export promotion agency for the distribution of and sale of Indian products on an international scale – India’s finished steel consumption is anticipated to scale up to as much as 230 MT by 2030-31 from just 93.43 MT in 2020-21. In addition to that, in the last two quarters of FY22, demand for steel is expected to increase by 17% to 110 million tonnes, all propelled by construction activities.

Before we analyse the rather successful steel industry that we see at present, and throw some light on the major players of the sector, let me take you through the predicament that the steel sector faced with, just a year back when COVID struck.

2019 in itself wasn’t a very pleasant year for the steel industry. Real estate wasn’t in a great shape, the automobile sector wasn’t very booming and there were several macro environmental factors that were not exactly contributing to the growth of this sector. In fact, the overall demand for steel had stooped to an all-time low and major players like Tata Steel and JSW Steel faced massive losses. The Covid 19 pandemic that hit the country in December-Jan 2019 was the final straw and demand for steel in India plummeted.

Now, let us sit back and reflect a bit. Take for instance a company, which is a major steel manufacturer – one of the best in the country – and which reports losses in its financial statements due to a downslide in domestic demand. How does the company bounce back?

Well, as they say, every cloud has a silver lining and that is what proved to be true for Tata Steel – one of the leading steel manufacturers of the country. Just when the economy was going for a toss – an unlikely market opened up for India’s steel sector and it was none other than China. Having closed their borders due to the pandemic few months back, China was slowly trying to revert back to its pre-covid state and they became the biggest procurer of Indian steel between the months of April and September 2020. As far as the stats state, China alone accounted for 30% of the total exports of Indian steel during this period and as for India, well, she, for the very first time, turned into an exporter of steel to China!

Add to that, it wasn’t long before domestic demand for steel reached an all-time high during the said period of time. As offices closed and people relocated back to the comfort of their homes with the new-found concept of telecommuting/working from home and citizens became more and more sensitized on the topic of personal hygiene and “social distancing”, they started investing in automobiles (vehicles)/real-estate/other steel products. In fact, if one would recall, demand for dish-washers, which are majorly made of steel and plastic, rose exponentially in Indian households, when Covid took away the idea of “maids” doing the household chores. Steel makers like Tata Steel, thus found themselves in a very prosperous position and it was a time like no other!

However, at this point of time, one must be wondering why does China need so much of steel all of a sudden?

If reports are to be believed, China wants to lower its steel production this year. The steel sector happen to be one of the biggest polluters in China, producing around 20% of carbon emissions of the country. Thus, Beijing has targeted the steel sector as a part of its carbon emission reduction campaign and has aimed to reach net zero level of carbon emission by 2060.

Given the aforesaid scenario in China and all the strict government regulations that have been strategized and kept in place, steel makers in China have no option but to comply with the same. Thus, the governing authorities of China have now decided to source their steel from lucrative international markets like India, for their infrastructural aspirations.

Hence, this brings us back to the success that India’s steel sector is experiencing as of now. Tata steel, for example has earned its highest ever operating profit in December, last year. In the last quarter of FY21, they recorded substantial profits. In the June quarter of FY22, Tata Steel’s revenue scaled up to as much as 109% and they earned a profit of 8900 crores compared to the loss that they had incurred in the same period last year.

Picture credit: Finshots/Google Images

The Indian economy is thus, slowly but surely coming back on track with revival of several industries like that of steel. Whether this recovery continues or not, we must wait and watch.