Demand Projections Blamed For Steel Sector Slump

The public sector Steel Authority of India Ltd (SAIL) yesterday blamed optimistic projections of steel demand by the government and financial institutions for the slowdown in this sector.

SAIL chairman and managing director Arvind Pande said it is a question of over-production. He said unrealistic demand projections had led to a glut in the market. The government and the funding agencies should have a more realistic projection of demand for steel, he said.

Due to the over-optimistic projections, all the new players had come into the hot-rolled (HR) coil sector leading to a glut in the market for the product, he said.

 

Pointing out that SAILs main problem was in HR coils, Pande said the absence of matching demand for the product along with incessant import from Russia was one of the reasons for SAILs below-par performance during the last fiscal.

The sail chairman said another problem was that most of the competitors in the private sector were producing HR coils from new hot strip mills, while modernisation of SAILs hot strip mills at Rourkela and Bokaro was still underway.

In the second half of the current fiscal, SAIL will be producing comparable products with steel majors in the private sector like Tata Iron and Steel (Tisco), Essar and Lloyds once the Rs 5,000 crore modernisation of Rourkela and Bokaro hot strip mills go onstream, he said.

However, Pande admitted that SAIL should have modernised their hot strip mills much faster to compete with its rivals.

On the issue of demand assessment, he said there should be a more realistic assesment of demand, since steel was a capital intensive sector.

The economic research unit of the joint plant committee had projected steel demand on the basis of an elasticity co-efficeint of 1.33, whereas the actual co-efficient last year was somewhere in the region of 1.0, he added.

Steel majors in the country have been demanding that steel be treated as infrastructure sector besides measures to curb dumping by countries of the erstwhile Soviet Union.

On the outlook for the future, Pande said forecast for the current financial year looked better than last year when SAIL had suffered a 60 per cent fall in the net profits. The outlook for the year is not bad. But, how much it will be better I do not know.

He said the corporations inventory build up of around Rs 2,000 crore, equivalent to around six to eight weeks, was not unmanageable as it constituted only one-seventh of SAILs turnover of Rs 15,000 crore.

We are not cutting down our production, whatever we are producing we are selling in the market. The only problem is with liquidating our last years production, Pande said.

Confident about a pick-up in exports, the SAIL chairman said exports should start looking up this year since the international prices have firmed up.

He said SAIL was planning to export about 10 per cent of its total production, while other steel majors like Tisco and Jindal were talking about exporting between 15 to 30 per cent.

Pande said there should be no problems in exporting since the margins were comparable with those prevailing in the domestic markets.

He said the current downswing in the steel industry, and SAIL in particular, was a temporary phenomenon and the prospects in the medium and long-run were good.

Steel is a basic material used across the span. We will do well when everybody does well, he said referring to the performance of sectors like construction, engineering, capital goods, consumer goods, transport and railways.

The SAIL chief said the steel sector had witnessed continuous growth in the last decade with 1994-95 and 1995-96 recording a steep rise while in the last financial year the sector fared badly not only in India but the world over.

SAIL denies any CBI investigation

Press Trust of India NEW DELHI

Steel Authority of India (SAIL) yesterday denied that there was any Central Bureau of Investigation (CBI) enquiry against its top officials.

There is no CBI investigation against any of the top company officials, SAIL chairman Arvind Pande said denying media reports.

There could be some routine enquiries going on. But there was no CBI enquiry or case registered against SAIL top officials, Pande said.

He said enquiries keep going on since it was a public sector company.

Had there been any corruption, I would have been the first one to take it up, the SAIL chief said.

Media reports had suggested that Central Bureau of Investigation had launched investigations against six of its top officials including some directors and executive directors.