Domestic steel companies turn to small OEMs as car sales continue to drop

Domestic players are pushing more material through the distribution channels that is being lifted by small OEMs/vendors

With India’s car sales last month being the worst in eight years, domestic producers of flat steel are approaching smaller Original Equipment Manufacturers (OEMs).

“The larger OEMs are not lifting the material. In the past three to four months, there has been a shift of 20-30 per cent of (steel) companies’ volumes to smaller OEMs,” a director with the Bombay Iron Merchants Association said. Small OEMs are small vendors, which bring required steel material from distribution channels. In the current scenario, domestic players are pushing more material through the distribution channels that is being lifted by these small OEMs/vendors to use the steel in electrical or furniture products.

JSW Steel and Tata Steel are the top producers of flat steel, meant for the automobile industry. The Society of Indian Automobile Manufacturers (Siam) said April was the 10th month in a row (since July 2018) when car sales fell. The drop in April was 15.9 per cent from the same period last year, at 2,001,096 units. Industry officials said flat steel prices had not been hit but would be if this situation continued. “We have re-oriented ourselves in both alternative segments and alternative markets,” said a senior official with one of the top producers.

Import of automobile-grade steel was also down, as a result. “Drop in imports of steel has taken place only in selective steel products, which are used in the automotive industry. However, overall imports continue to remain high,” said Sushim Banerjee, director-general of the Institute of Steel Development & Growth.  Import of cold-rolled steel products from South Korea have declined by 10 per cent in the past two to three months. Officials said once a new government takes office at the Centre, there could be some demand revival in the automobile market.