Steel players ready capex plans to substitute cheap imports for industry

Domestic primary steel producers are aiming their capital expenditure at substituting imports, that have risen and are capturing the market because of low-priced products.

“There is a strong import substitution plan in place. We have developed new grades that substitute imports from Russia in segments such as defence, submarine and shipbuilding,” said a senior official with state-owned Steel Authority of India (SAIL).

Besides SAIL, Tata Steel, Sajjan Jindal-led JSW Steel and Naveen Jindal-led Jindal Steel & Power are two of the big primary steel producers in the country.

During April to November 2018, India’s finished steel imports surpassed exports by 0.7 million tonne, making the country a net importer of the commodity compared to being a net exporter in financial year 2016-17 (FY17) and FY18. Consumption of steel during the period stood at 71.6 million tonne, up 7.9 per cent from the corresponding period a year ago. 

Industry executives said the flooding of steel imports into the Indian market is mainly because of the cheap price, and is not driven by a lack of availability of products in the country.

“It is difficult to give the ratio of import substitution and fresh products that will make up the entire product basket. But I can say that we have all capabilities that a German, Korean or Japanese steel maker does. It is a high-end play at not just quantity but also at a quality level,” said Rajiv Kumar, vice president (operation) at Tata Steel Kalinganagar.

Tata Steel Kalinganagar has kicked off its phase-II expansion of five million tonne cold rolling mill, scheduled for production by FY21. The expansion will install one of the biggest blast furnaces in the world, taking the total capacity at Kalinganagar to eight million tonne catering entirely to the auto sector. The investment for phase-II expansion is Rs 23,500 crore.

SAIL is also engaged in modernisation of its facility and aims to augment its capacity to 50 million tonne entailing an investment of Rs 150,000 crore by 2025. SAIL’s current capacity stands at 21 million tonne.

“Going ahead, we are making rail wheels to substitute imports from Netherlands and France and API (American Petroleum Institute) specification grade pipes in oil and gas sector to stop imports (of these products) from China, South Korea and Japan,” said the SAIL executive.

Over the years, India has become the third largest steel producer in the world with production of 91 million tonne and a capacity of 122 million tonne in FY16.

“For us, the strategy to make import substitution steel is not new. We have already been doing that in the tinplate segment apart from electrical and automotive steel which is high-end steel. Through our announced capex, we are aiming at both substituting imports and catering to growing demand for newer products of domestic market,” said Jayant Acharya, director (commercial & marketing) at Mumbai-based JSW Steel.

In FY18, JSW Steel announced a capital expenditure (capex) plan of Rs 26,800 crore for the next three years, which includes augmenting crude steel capacity at its Dolvi plant to 10 million tonne from 5 million tonne and revamping and upgrading capacity at Vijayanagar to 4.5 million tonne from 3 million tonne. The company is also looking at expansion of existing units, along with new greenfield steel projects in Odisha and Jharkhand, for which it has already started acquiring lands.

The domestic steel industry has been dealing with the issue of high imports for a while now. Since 2016, the government has taken several steps to curb cheap imports by imposing minimum import price which was followed by anti-dumping duty.

Indigenous steel 

• JV with global players to help substitute imports
• Price, not lack of availability, the main reason for imports
• Domestically made steel has advantage of assured supply
• Besides SAIL, Tata Steel, JSW Steel and Jindal Steel & Power are primary domestic steel producers