Steel service centre sector to log accelerated growth: Frost & Sullivan

The steel service centre (SSC) market is expected to log accelerated growth in the next five to 10 years as industries like automotives, white goods, fabricators and others need to reduce their inventory costs to be competitive, according to consulting firm Frost & Sullivan.

SSC is basically a value-adding intermediary, a connection point between steel producers and final manufacturers by providing supply chain management, procurement services, technical services, stocking, processing, and just-in-time (JIT) services.

The main role of a SSC is to perform processing requests on steel products as per manufacturers' specifications and supply the product in the exact dimensions, form and quantity demanded.

As steel makers expand capacities and more and more customers opt for customized products, the Indian steel market is making a steady shift toward selling steel solutions instead of simply selling steel, Frost & Sullivan says in a research report.

While the SSC concept is relatively new in India, the sector cover only about 15 percent of the total Indian flat steel production, which was about 5.75 million ton in FY 2012-13.

"This is very low as compared to other countries where service centers account for approximately 60-70 percent. It is estimated that SSCs will process around 25-30 percent of Indian flat steel output (around 13.26 million MT in FY 2017-18)," Frost & Sullivan predicts.

According to Frost & Sullivan, steel consumers prefer procuring material from SSCs than distributors or steel manufacturers because of shorter lead time, smaller batches, growing preference for SSC, logistics cost, product range, and quality certifications.

In developed European countries, the SSC concept is well developed with advanced facilities such as computer-aided design/computer-aided manufacturing (CAD/CAM), laser cutting with extremely high precision and accuracy resulting in high yield and finest quality of output.

Frost & Sullivan estimates that approximately 300,000 firms buy a large portion of their metal requirements from SSC across the globe.