BANKS NOT FUNDING NEW STEEL VENTURES: TATA STEEL MD
Tata Steel Managing Director T V NARENDRAN believes India could become a net importer of steel in the next few years. In an interview with Kunal Bose, he says the country will experience steel demand growth running ahead of capacity growth. Edited excerpt
Is there a possibility of Indian steel capacity growth not matching demand growth?
In medium- to long-term, India’s steel demand growth will run ahead of capacity growth. I shall not be surprised as capacity growth comes under some serious pressure because of the industry’s poor working in the past few years, the country, like it happened in 2015-16, once again becomes a net importer of steel in a few years.
Last year, our steel exports fell 32 per cent to 3.80 million tonnes (mt) while imports, largely predatory priced, were up 20.2 per cent to 11.20 mt. Mercifully, because of minimum import price and antidumping action steel trade balance is changing in our favour this year.
You, then, don’ t think India will achieve the steel capacity target of 300mt by 2030...
Except for a few, steel companies are heavily debt-ridden with major cash flow problem queering their pitch further, thanks to a difficult market. Around 30 per cent of over ~3 lakh crore bank credit to the steel industry has become non-performing asset. Naturally, the banks are shying away from funding new steel ventures or brownfield expansion by operating mills.
Public-sector steel companies have ambitious expansion programmes. But, they are not generating surpluses to fund growth. Will the government committed to funding very ambitious infrastructure development be able to find money to support public sector unit steel capacity growth? A question hangs over the achievability of 300-mt target.
What led to disenchantment of foreign steel majors about India from their initial euphoria?
For the likes of ArcelorMittal and Posco, India is one of the many options available. I give a couple of examples. As the fate of Posco’s 12-mt Odisha plant remains uncertain even after 11 years, it is expanding capacity in a big way in Indonesia and Vietnam. In the past few years, ArcelorMittal has put big money in China and the US. Foreign or Indian, the ease and also cost of doing business will have a major bearing on new investments.
Are you hinting at the difficulties inland buy out and securing iron ore mines for captive use for investment shyness in steel?
Whether it is land or mines acquisition, the process is the same for all groups, Indian or foreign. You have a level playing field. Local companies such as JSW Steel, SAIL and Tata Steel will rough it out here to grow capacity. See, it took us 11 years to commission a 3-mt plant at Kalinganagar in Odisha, braving many odds relating to land acquisition and resettlement of displaced people. Now that we have the support of local community for our endeavours, we are confident of making Kalinganagar an 18-mt steel production centre in a course of time.
At the recent World Steel Association meeting in Dubai, you were very vocal about imports hurting Indian industry.
Over the years at huge investment, India has built steel capacity of over 120 mt. Why should it be made to suffer at the altar of unfair trade? Yes, exporting countries, including China, have reacted strongly to New Delhi’s trade actions to stop dumping of predatory priced steel here. We are ready to deal with any such reactions.
Have recent revisions in steel prices fully mitigated the impact of four-fold increase in coking coal prices?
The answer is no. We need another $50-$100 a tonne rise in steel prices, depending on products. Mind you, iron ore prices have also advanced quite a bit.
Tat a Steel in India continues to grow organic ally. Steel assets should now be available at attractive prices. Are you looking at buying opportunities?
Yes, that’s an option for us. We did look at Electrosteel Steels unit at Jharkhand at some point. Nothing happened. In future, if anything interesting comes our way, we will definitely consider buying that.