T V Narendran, chief executive officer (CEO) and managing director of Tata Steel, says: “Domestic demand during the lockdown
and its progressive easing emerged from rural India, which benefited from a good monsoon in 2019 leading to record foodgrain production.” That this community is engaged in using the extra money with them in building houses and grain storehouses is evidenced by demand generation for steel and cement during the pandemic. This year, too, the country is having a normal, well distributed monsoon encouraging farmers to bring in extra land under kharif crops. So expect good rural steel demand
to last till the middle of 2021, assuming rabi cultivation will be plentiful too.
According to Narendran, “demand generation from this sector in the present trying times is also aided by government spending on rural infrastructure and affordable housing.” Steel in the form of pipes and hardware will be required in growing quantities as the government wants to provide piped water connection to every rural household under Jal Jeevan Mission by 2024. Moreover, all steel-based items linked to the rural economy are seeing their consumption grow. “In the automotive sector, tractor sales are reasonably good and motorcycles are doing better than scooters. The reason being their rural connection,” says Narendran. According to rating agency Crisil, a good monsoon has proved to be a mitigator of the coronavirus
impact on tractor sales.
Of its Rs 82,125-crore turnover, Tata Steel earns around 20 per cent revenue by selling roofing materials, reinforcing steel for individual house builders and farm equipment in the rural market.
A recurring theme in Steel Minister Dharmendra Pradhan’s exhortation is that steelmakers must “develop low-cost, high quality products suitable for rural consumption. These could be highly steel-intensive affordable rural housing, irrigation pipelines and daily use products.”
Chairman Sajjan Jindal says in the same vein: “The only way to increase steel demand
is to move into people’s households. Steel mills are required to promote use of the metal in furniture and household goods and not just stay focussed on high profile sectors such as automobile.”
Popularising steel products the way Jindal has recommended will lead to substitution of wood by steel, which is recyclable, in the making of furniture, doors and windows for use in urban, semi-urban centres.
As more such products are developed by major steelmakers using their technical and designing skills, benefits will accrue to medium and small enterprises who will be assigned to make them. In pioneering moves, Tata Steel has developed a steel-based smart housing solution, steel windows and doors and water vending kiosk made of steel, which are finding increasing acceptability. Introduction of value-added products for use by ultimate consumers will to some extent insulate steel from business cyclicality. Fortunes of the metal will, however, continue to be decided by the performance of the broader economy. Hopefully, rural market among all steel-consuming sectors alone standing out in a situation of near total demand destruction in April and May will henceforward lead steelmakers to aggressively promote the metal use beyond traditional consumption points.
Job losses caused by the Covid-19 outbreak forced nearly 30 million migrant workers constituting a fifth of urban labour force to return home braving all odds. There is welcome realisation in the government that the only way to lure a good number of them to return to cities to give a leg up to economic activity will be to give them inexpensive rental dwellings. At the same time, for the benefit of those who will not risk going back to cities, the government is to implement a series of rural infrastructure projects, including housing for the poor. All that will translate into demand generation for construction steel.
Reminding that as much as two-thirds of steel demand
originates in infrastructure and construction work, Dilip Oommen, CEO of ArcelorMittal Nippon Steel India, says not only does steel need more state-funded infrastructure projects, but the industry also requires “the government making payments on time, even upfront to expedite work. Backlog of unpaid bills contributes to the freezing of unfinished projects.” As the pandemic has robbed the industry of demand, Oommen wants steel to be made the material of choice in all possible areas on grounds of “safety, durability and life cycle cost.”
China, which continues to make impressive economic recovery since late February, has this year been a major destination for Indian steel exports.
But that has not stopped Oommen from worrying about the “enduring threat posed by Chinese state-subsidised steel imports.
” His concern is not to be taken lightly. World Steel Association has forecast Chinese 2020 demand to rise barely 1 per cent to 916.5 MT and demand next year to remain static. So as the year advances, China is likely to have surpluses that must be exported. As in the past, India, where multiple local taxes constituting 12 per cent of production costs rob Indian steel of “competitiveness before it leaves the plant,” will be a natural export target for China. Oommen says in the circumstances, introduction of the border adjustment tax will be relief to Indian steel.