Steel is a peculiar industry

Steel is a peculiar industry

Recently, in one of the business conferences, I was asked, “What are the steel industry’s demands from the government? What are your expectations from the budget ?” My answer was, “No, we do not need anything from the government. Let government take enough measures to boost the country’s economy and we will be the natural beneficiaries”!

Steel is a peculiar industry.  Its demand lies outside the industry. As we all know, infrastructure, automobile, engineering, white goods are the major customer industries for steel.

The steel demand depends on how well these industries perform. Their performance in turn depends on the buying power of the people and general economic sentiment prevailing in the society.

Thus, if the government takes such measures which directly or indirectly boost the economy, steel industry is a natural beneficiary. These measures may include triggering the mega infrastructure projects, reducing excise duty on automobiles, introduce one window clearance system for manufacturing sector, especially MSME segment.

All these measures will translate into additional steel demand and will help the steel industry to grow.

Last few years, iron & steel industry suffered mainly because of lack of domestic as well as overseas demand.  Many mega infrastructure projects were put on hold. Developed world started witnessing recessionary trend which curtailed export potential. Auto demand suffered a setback due to high fuel prices and high interests on auto loan. The sharp decline in fuel prices will surely help this industry to some extent.

Steel is a peculiar industry

‘Demand growth’ has become a very scarce commodity in the world. Only few countries like the United States hold that special power. In my opinion, it is the time to let the domestic players take the advantage of this demand. We are witnessing a lot of dumping including steel and the government needs to be very vigilant in these matters. One may argue that the quantities involved in the imports are very small and will not be able to alter the demand pattern much. Yes, I agree that it may not alter the demand but even such small quantity has the potential to dilute or decrease the price. This can adversely affect the bottom line of domestic steel companies.

I would still say that today the industry sentiment is positive but the present government has to do something on an urgent basis to keep it positive even tomorrow.