India witnessing investment-led growth with focus on infrastructure: TV Narendran

The demand side will continue to be strong. Over the last few years India is moving to an investment-led growth with higher spends on infrastructure; as against its traditional consumption-led growth.

The steel intensity of growth in the past has not been so great. And the steel consumption growth was slower than the GDP growth of the country, which is quite unusual for developing countries. Normally, the steel demand growth is higher than GDP. But, now India is moving into that phase with the focus on infrastructure. So I am bullish on demand. Thats why we are investing and increasing in capacities, anticipating higher demand.

On the prices side, it is more dependent on global markets. A lot depends on what happens in China, its exports. So there is a de-linking between demand and price. There can be situations where the demand is good but prices moderated.

It (steel price) also depends on the input costs; and nearly 40 per cent is cost of coal. Coal prices have been quite volatile recently. Last year it had shot up to $600 per tonne, came down and settled at $210 – 215 per tonne; and is now back at $245 – 250 per tonne range. So input cost international prices will have an impact on steel prices. But demand will continue to be driven by domestic market factors.

The most challenging part for the steel industry was in 2015 when China was exporting about 10 million tonnes (MT) a month. That was when there was a lot of noise about Chinese exports. Since then, Chinese exports had come down to about five MT / month, which the world was living with. But over the last three-to-four months it is up to eight MT / month. And that’s why there was pressure on prices. It went up to eight MT/ month, as the Chinese companies had increased production anticipating recovery post removal of Covid restrictions. But that did not happen. At the same time you have the Chinese government saying that they want to limit steel production at same levels of last year. So if they are to follow through that, then it means Chinese steel production would be lower in the second half than in the first half. Exports are expected to be less too. So we expect that to happen and it should push up prices.

So the (benchmark) hot rolled coil (HRC) prices are in the $570 per tonne range. And, if the exports are to come back to five MT per month levels, then I expect it to be at $600 – 650 per tonne range.

Its more to do with India’s exports had drop, rather than imports going up. Of course, this disturbs the balance in the domestic market.

I think exports will go up as international prices move up. Otherwise, there is no great motivation for Indian steel makers to export. Domestic demand is quite good. Whatever is being produced domestically is consumed domestically. Even if you see now, no one is sitting on very high stocks. So we are in a comfortable position despite monsoons generally being a lean period for steel consumption.

I don’t know if one has the option to re-work the FTAs. But yes, (in case of) the FTAs signed with Japan and Korea, the numbers suggest that they sell more in India than we sell into those countries. That is the larger question. From a steel industry point of view by agreeing to very low tariff levels, almost zero tariffs, we have not really helped ourselves.

We really need to look at how do we get people who are interested to sell steel in India, to invest here, make steel here, and sell here. We have one of the most liberal investment laws here. One can own 100 per cent in the mill or in mining activities and very few countries allow that kind of flexibility.

A lot of steel capacity comes up in some of the poorer parts of the country. So I think strategically it is important for India to leverage steel and the opportunity we have to create jobs and manufacturing capacities in the poorer parts of the country.