Global factors are changing at a very fast pace and they are forcing to change other things along the way. Indian Steel Industry is one of them. Which is facing the heat of change in global factors. The demand for steel is decreasing all around the world. The global slowdown is one of the factors, but not the only one. Other factors include increasing environmental concerns, continuous shifts in the manufacturing process, increasing global trade, new technological substitute products & decreasing capital returns. One major factor, which in itself is cause for many other factors is technology.
Technology is impacting steel Industry from extracting of iron ore to the finished steel products. Major impact areas are-
- Mining Operations
- Furnace process, Melting ore
- Reuse of scrap steel (lowering the demand for fresh steel)
- Use of Energy as input
- High efficiency in forging, casting & alloy process
- Demand for high-end alloy steel, corrosion resistant steel
Change in Strategies
All of these changing scenarios had lead to change the strategies of steel players to move ahead. The major heads in which these changes can be captured are –
- Rationalize Excess Capacity – There is excess capacity in the global market & demand to remain low for many years to come. With this certain fact, Big players need to change the focus from producing only raw steel to producing high-end specialized products. Also, to remain cost competitive industries need to more efficient in the production process. The industry also needs boost from the government, in form of protection against low-cost steel from China & support for the sectors which consume steel – Power, infrastructure.
Increase Market and Product Concentration – Big Indian Steel Industry players need to cover the unreached segments of the market with increased product portfolios. Instead of making limited flat plates & rolled steel bars, they need to expand the product range to I-sections, tubes & other products which are not catered.
- Increase Market Competitiveness – players need to consolidate the markets by enhancing their retail business using an increased number of retail stores, marketing strategies & majorly by reducing the size of direct order (for ex. Tata Steel minimum order taken is of 1000 tonne).
- Embrace Digital – Using the digital process & technology – productivity & cost efficiency can be increased, Volatility of demand & supply can be reduced, and increased demand centers can be handled.
Major Impacts on Indian Steel Industry –
- Impact on MSME & SME – All Indian Steel Industry players had started making & delivering products for smaller markets. Because of this, there will be a consolidation of MSME & SME steel companies into big one or die out of the fierce competition. Tata steel has established Tube Division. Also, Astrum division for SME, Ferro Alloys and Minerals Division (FAMD). All these units come under the head of strategic business units. These units will compete with secondary steel manufacturers with an additional advantage over them.
- Global Expansion – Since the overall demand of steel to remain low. The only way to expand is through mergers or acquisitions. Also to remain cost competitive & get an advantage of economies of scale – Indian Steel Industry will witness consolidation, both horizontal & vertical worldwide. Major Indian steel players had started collaborating, Merger or acquisition with/of foreign companies. Because the purpose of these expansions is to acquire new technology, access to better raw materials (coal & Iron ore mines) & entry to new markets.
- Reduction in Employment levels – Because of automation & use of analytics to increase the efficiency of operations; there will be a loss of jobs. Also, the shrinking MSME & SME industry will impact job loss, since MSME & SME units depend more on manpower than technology in compared to big companies.
Future of Indian Steel Industry
- Increased Competition in Indian Market – Relaxation on FDI norms & availability of domestic demands along with low cost – had attracted the global steel players to establish plants in India. The entry of POSCO in Indian is one big event. Since POSCO is a leader in the field of technology. This will increase the competition in Indian Market.
- India’s Emergence as major Steel producer – With India being the only country with positive demand for steel & also the huge support from Indian Government to steel Industry (National Steel Policy), Indian Steel players has edge over global players. Though Indian players lag behind in terms of technology, they are catching up fast.