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Interview
“Our focus is on the development of construction-based
steel”
Ankit Miglani, Director (Commercial), Uttam Galva Steels
Ltd
The numbers testify to this company’s global standing—more
than 70 per cent of the products of Uttam Galva Steel Ltd
are exported to over 141 countries. One of the largest manufacturers
of cold rolled steel and galvanised steel in Western India,
it has a loyal customer base in advanced markets such as Australia,
France, Germany, Greece, the UK and the US, to name just a
few. In India, the company supplies Cold-rolled Close Annealed
(CRCA) coils to manufacturers of automobiles, white goods,
general engineering and the drums and barrels segment. What’s
more, the company is also a large supplier of galvanised coils
and sheets to the construction industry.
Ankit Miglani, Director (Commercial), Uttam Galva Steels Ltd,
speaks to CW about the company and trends in the
steel industry…
Tell us about your product mix.
Seventy per cent of our product mix is galvanised. We installed
some equipment last year when steel prices were $ 1,200 a
tonne – we forecasted that we would increase capacity
20-30 per cent every year because we expected some lead time
to reach full potential. This current fiscal, we expect about
7.5 to 8 lakh tonne, out of which 70 per cent will be galvanised.
Out of this, perhaps 70,000 to 80,000 tonne would be colour-coated
and that also goes strictly to the construction industry.
Some marginal quantities go to white goods, but the bulk of
it goes to the construction industry. As well as supplying
to India, we sell to the US, European and Middle East markets.
Does growth differ over the various sectors you supply to?
If you see one sector with more demand, do you focus in that
direction?
Not really. Growth has been consistent overall and we have
to maintain a relative spread. The demand crunch is hitting
all industries; not just construction or auto or white goods,
or just engineering. It’s across the board. Even if
one industry like auto is hit harder than construction, hypothetically,
a lot of the steel that used to go to auto suddenly switches
flow to construction. There could be a lag of a few months
but the effect takes place eventually. The water finds its
way. So overall we don’t see much of a change in the
spread.
Given the fact that the government is in place again, infrastructure
projects will be the top priority of the government and the
requirement of steel will keep the prices firm. Globally,
we expect demand to still be slow for a while. We don’t
expect the levels we crossed last year for at least a couple
of years. Domestically, things are stable although the market
is not growing as fast as it was two years ago. People want
to clean up their inventories before they start buying new
things. So there is a lot of pressure on a lot of segments
including construction, auto and white goods.
Will you now shift your focus to the domestic market as there
is more stability here?
We have always been saying that we have to shift our 70 per
cent export to 50 per cent and sell 50 per cent to the domestic
market, but with higher volumes. So where we are producing
4 lakh tonne to 5 lakh tonne now, we want to produce 8 lakh
tonne to 9 lakh tonne and eventually go to a million tonne
– half of that would be exported and the other half
sold dome-stically. The new line of colour-coated products
that we have installed will help us do high tensile steels,
PEBs and more variants of construction grades. So we are hitting
different markets altogether because different continents
have different requirements. Now, we are able to cater to
a more diverse product mix, even in construction.
How is your cost compared to other countries?
We are better because we supply to niche segments. We supply
products that the domestic mills don’t want to supply
because they are not cost-effective – with small batch
sizes in niche products, the yield losses are too high. So
our focus is more on value addition rather than volume.
What kind of a power plant are you going for?
A thermal, 60 mw coal-based one that will be located at the
Khopoli site.
Do cement prices affect demand?
They do affect the price of steel to some extent. There is
a product called asbestos roofing that competes directly with
steel roofing; so when cement prices move up, asbestos prices
move up. It affects the demand of steel roofing. Because the
price of steel went up so sharply, a lot of people switched
to alternate products.
How would you assess the economic situation in April-May?
Every month has been better than the previous one. A lot has
to do with the fact that imports were restricted in November,
which dried up the market gradually over a period of time.
And there are very strong rumours that even if safeguard duty
doesn’t come in, there would be natural duty implemented
in the next Budget to protect the steel industry, which would
be more homogeneous – instead of focusing on one product
it would be across the board. So it will be easier for the
entire industry to observe.
What is your opinion on the government deferring the safeguard
duty?
Safeguard duty doesn’t help end users at all obviously,
because you either help the steel company or the construction
company or the auto company. If you put the safeguard duty
in, it will hike the price of steel and make you uncompetitive
on a global scale. Even on a revised price structure, it is
not that the domestic Indian company cannot compete; it is
a matter of lag time. All steel companies are stuck with high
price inventories that have to be liquidated over a period
of time and they need some breathing space to liquidate that
inventory. At the new raw material prices, Indian steel is
viable and profitable. In the long term obviously the safeguard
duty comes in. And while it does protect the big steel companies,
it hurts the interest of consumers.
On the one end we export, on another we have to pay an import
duty and we are also hiking steel prices. Isn’t there
a mismatch somewhere?
The mismatch is in timing. When they were exporting, they
weren’t asking for a safeguard duty. The problem is
that the global market has completely melted. For instance,
of the approximately 15-16 million tonne flat products being
produced in India, only about 3-4 million tonne is being exported.
Even if India’s consumption goes to 15 to 20 per cent
or higher, to cover that quantity, it will take a very long
time. In the export market, the prices are extremely low.
So even the strong dollar does not compensate?
What’s unique about the Indian situation is that even
raw material is priced in dollars. Countries where raw materials
are priced in local currency have an advantage here. If you
look at textiles, the raw materials are priced in rupees and
exports are in dollars. So depreciation in the rupee helps.
In the steel industry, it doesn’t make a difference.
At a Glance
Currently exports 70 per cent; plans to sell 50 per cent to
the domestic market.
Half of the galvanised steel produced goes into the construction
sector.
Cement prices do affect price of steel to some extent.
Safeguard duty doesn’t help end users.
Depreciation in the rupee doesn’t affect the steel industry.
At the new raw material prices, Indian steel is viable and
profitable.
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