Despite threat of cheap imports, India's stainless steel demand to grow exponentially: Jindal Stainless

• Stainless steel demand to surge in mid- to-long term
  
  
• Govt initiatives to boost demand
  
  
• Stainless steel usage for defence, coastal infrastructure to increase
  
  
• Steelmakers' margins to improve after export duty removal
  
  

The Indian stainless steel industry has been struggling with several issues since the beginning of CY22. Weak domestic as well as global sentiments have weighed on industry growth in the first nine months of the calendar year, said Vijay Sharma, Director of Jindal Stainless Group, at SteelMint's recently-concluded Engage 3.0 webinar series.

Sharma underlined the following reasons for slow growth of the industry:

• Subdued domestic demand, reduced exports: There has been weak domestic demand and less export opportunity for stainless steel makers.
  
  

"Indian products are in high demand in the developed economies like Europe and the US. Before the export duty was imposed, 50% of the country's total exports were to northern European countries like Germany", Sharma said.

But with duty imposition, opportunities for Indian players shrank.

• Imports influx: Continued import influx from China and Indonesia emerged as a threat to the industry. Supporting his statement, Sharma gave figures of FY22 which showed that imports from China and Indonesia grew by more than 178% compared to FY21. Looking at the first five months' data of FY23, volumes are expected to rise close to 300% over FY21, he said.
  
  
• Bearish global market: Europe energy crisis and subdued demand due to war, coupled with Covid economic downturn have weighed on domestic stainless steel sentiments as well.
  
  

Despite these challenges, the industry is hopeful to see some growth in the last quarter of CY22. It is estimated that in Q4, demand in the domestic market would grow 10% over the previous quarter backed by improved performances of the end-user industries such as automobile, railways, processing and tubes.

Notably, India's total stainless steel production capacity is 7.5 million tonnes (mnt), of which flats products' share is 5 mnt and the rest is longs.

Another 1 mnt is likely to get added soon with the Jindal Stainless' expansion in the flats products section.

Govt initiatives to boost demand

Stainless steel demand in India is likely to see a jump over the next few years with the help of the government's impetus, Sharma said.

He was optimistic that the government's strategies like GatiShakti, Awas Yojana, Nal se Jal, National Infrastructure Pipeline, investment financing and digital rupee will definitely improve the competitiveness of the 'Made in India' products in the mid-term and long-term.

"The direction of the government is good, futuristic and transformational. It focusses on sustainability whether it is in the economic front, environmental front (carbon footprint), or social front (hygiene, safety etc.)", Sharma said.

He also added that the steel ministry's various initiatives like National Steel Policy (NSP), Steel Import Management System (SIIMS), standard quality control orders (QCO), new fair price shops (FPS), scrappage policy and Brand India have been supporting the industry's growth.

Demand to cross 6 mnt in 8 years

Based on a mathematical model, Sharma made a forecast that if there is no black swan event happening, and if stainless steel growth is at a pessimistic 7%, GDP at 6.25% and population remaining constant at 0.95%, then stainless steel demand in 8 years will go to 6.4 mnt; in 14 years to 9.5 mnt; and in 25 years (by 2047) to 20 mnt.

He is very much confident that demand is likely to be higher than 20 mnt because of various impetus measures taken by the government.

Potential markets for stainless steel

The traditional applications of stainless steel are in architecture and building construction (ABC), railways and transport, process industries and capital goods. These are going to increase in a big way.

As far as new applications are concerned, the focus on defence will need a lot of stainless steel.

In addition, for green steel and coastal infrastructure, a lot of stainless steel would be required, Sharma explained.

Export duty removal, and benefits

In a highly significant development late on 18 November 2022, the government rolled back export duties on steel and steelmaking raw materials.

After this move, Indian players will have a level playing field with key exporting countries like China and Indonesia. Not only domestic producers but the duty removal will also be beneficial to raw material suppliers.

Since exports would resume, there are chances that margins of Indian stainless steel producers will improve.