Hello. This is Grishma Gevariya from Grivaa Capital. Recently, we have witnessed quite a significant rally in the metal’s pack especially in the Indian steel sector.

So, it becomes very imperative to understand the intrinsic reasons in the Indian steel space. And thus, we are trying to decode this particular space.

Firstly let’s understand the importance and applications of stainless steel.
Stainless steel has diverse applications and is preferred over carbon steel due to its strength, pliability, longer average product lifecycle and low maintenance cost.

The two main types of stainless steel are long and flats which are widely used in Automobiles, Railways and Transport, often abbreviated as ART, and Architecture, Building and Construction which is abbreviated as ABC and process industries.

So, let’s understand the dominant players’ market share in the globally consumed steel.

As usual China dominates this space. It is the world’s Largest producer of Stainless Steel with 58% of total world’s production. India is a runner up in this race and occupies the second slot.

Because of its various applications in different sectors, the demand for stainless steel is highest amongst the peers, which includes both ferrous and non-ferrous metals.
Globally it has grown at a healthy demand of 5.3% CAGR.
However, the Indian growth is even better at 7.2% CAGR.
The major Indian players are TATA steel, Jindal Stainless, Essar Steel, SAIL and JSW Steel.

The Indian coking coal which is a primary raw material for stainless steel production has a very high ash content which reduces the production efficiency of the Indian stainless steelmakers.
• Also, Steel is a capital intensive industry; steel companies in India are charged an interest rate of around 14% on capital as compared to 2.4% in Japan and 6.4% in USA.
• In India, unfortunately the advantages of cheap labour gets offsetted by low labour productivity; e.g., at comparable capacities labour productivity of SAIL is 75 t/man year, for POSCO, Korea the values are 1345 t/man year.
• The biggest problem and challenge faced by them is the combined cost of coal, fuel and electricity which forms almost 45% of the input costs.

Let’s now understand the opportunities of the steel sector:

• Globally, there is strong growth in demand from APAC regions, particularly India and China.
• The biggest opportunity before Indian steel sector is the untapped markets. The Indian rural sector remains fairly unexposed to their Multi-faceted use of steel.
• The usage of steel in cost effective manner is possible in the area of housing, fencing, structures and other possible applications where steel can substitute other materials which not only could bring about Advantages to users but is also desirable for conservation of forest resources.

Now let’s go the threats:
• Steel sector faces stiff competition from global competitors and thus, government has taken various measure to protect the domestic market.
• Provisional trade remedial measures have been imposed on Indonesian imports to protect Indian steelmakers by levying provisional countervailing duty(CVD) on certain types of flats from Indonesia.
• We could also hear talks about ongoing re-imposition of anti-dumping duty on import of stainless-steel.

So this is the entire landscape of the steel industry.
We can conclude that steel space has high potential for growth and its growth is linked with the global economic growth especially China.
The iron ore price softened after reaching 10 years high due China’s environmental initiatives.
Companies are trying to stand out amidst the intense competition by offering more for solution based products to reduce steel cycle volatility.

The steel sector’s end users like Automobile, construction, appliances and even capital goods hav

With low inventory levels, the companies are operating at 90% utilisation and are expected to do so in the coming years to meet demand and supply.

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