CHAIRMAN's DESK

" ...The bottom line is that the industry has to tighten its belt and become more competitive so as to insulate itself to a large extent from the downward pressures in an essentially cyclical market..."

The mood in the steel industry is tremendously upbeat with over 40 million tonnes of additional capacity reportedly in the pipe line at an investment level of over Rs one lakh crore. If the majority of this investment fructifies, we can expect to confidently surpass our initial estimate of reaching 65 million tonnes by 2011-12 and perhaps even touch 100 million tonnes. The industry in general is performing extremely well primarily due to the higher international and domestic prices and this buoyancy is generally expected to last at least for a few more years. Hence, this is the appropriate time for additional investments so that we can fully exploit the potential in the present boom. Of course, there are anxieties about whether availability of raw materials will keep pace with the expansion plans. In particular, a number of iron ore mining leases will have to be sanctioned on a fast track in the near future both in the public and private sector. The demand for coking coal is also expected to rise substantially and there is little or no prospect of any substantial enhancement in domestic supplies. The majority of our additional requirements will, therefore, need to be imported and this is a matter of concern because there are limited suppliers of coking coal in the world and they can be expected to hike prices substantially.

Steel prices in general have remained stable primarily because of the initiatives taken by the steel majors to cut back prices and maintain stability for some time. The consumers appear to have settled down to the revised level of prices and are appreciative of the general stability that has set in the market. The small consumer, on the other hand is still apprehensive about getting supplies of raw material at the prices announced by the public sector companies because the effective market prices are higher. While the Government is trying its best to meet the requirement of small consumers through its SSI rebate scheme, nevertheless, there is no doubt that there is a substantial traders premium in the market.

Let us not forget, however, that in a de-regulated and liberalized environment, issues of price and investment are left to market forces. The I bottom line is that the industry has to tighten its belt and become more competitive so as to insulate itself to a large extent from the downward pressures in an essentially cyclical market. This is one mantra of success, which cannot be over emphasized.

( J P Singh Joint Secretary, Ministry of Steel & Chairman, JPC)
(This is excerpted from JPC Bulletin September' 04)