Indian steel makers, who started directly selling to customers through dedicated retail stores, are enjoying a dividend time. Demand in the smaller markets driven by demand from construction in these areas is doing better than that for larger cities. This article analyzes the fast evolving retail channel since growing brand conscious customers are now looking for quality and customized steel products directly at the doorstep along with the several reasons why the steel in retail is not only going to stay firm but also occupy increasingly larger share of revenues of steel mills in India.
The scenario for long products would, therefore, be influenced by the trend towards special grade wire rods for industrial use, rebars with high Fe content (Fe 600 / Fe 700), structural with light gauge high performance properties and rails with head hardening properties and stainless steel rebars.
Also see Categories and Types of Stainless Steels: Compositions and Properties
Traditionally, steel was used to be bought, never sold aggressively. Unlike past, when steel makers used to focus especially on larger customers now, steel makers and steel companies are also trying to reach out to consumers and educate them on possible applications. Analysts and steel industry guru feel retail steel may not increase sales in a big way immediately, but it has certainly long term benefits. Now, retail success in India, has vindicated the paradigm shift of the strategic focus.
As the share of the SME sector is predominant in long products, it is expected that they will be able to enhance their capacity utilisation. Supplies from Bhilai Steel Plant, IISCO Steel Plant, RINL, Tata Steel, JSW Steel and JSPL would also increase long products to cater to the emerging demand. According to the estimates of the India Steel Market Watch (ISMW), by FY31 the estimated demand for long products will increase to around 125 MT which is expected mostly to be catered by the domestic steel makers.
In wire rods, there will be increasing demand for the high carbon variety. Also see: Grades and Series of Stainless Steels - Compositions and Uses The demand for electrode quality and cold heading quality would also be substantial. It is also seen that stainless steel rebars are making some inroads into the pattern of demand by the construction agencies undertaking infrastructure projects particularly in the coastal areas as stainless steel has got excellent corrosion resistant property.
Retail steel - mainly construction products like corrugated roofs, bars and rods - are slowly forming a major chunk of total sales of a steel mill and roughly around 25 percent of the big steel companies' production goes to the retail sector. Steel consumption in India has improved by 5.2 percent year-on-year to 72.51 million tonnes (MT) in the April-January period of FY 2017-18. Sustained buoyancy in the auto sector, recoveries in construction and capital goods have led to the pick-up in domestic steel demand. With the backing of government's thrust on infrastructure especially, affordable housing, power transmission and railways there is no doubt that the growth of domestic steel consumption will remain favourable in the coming years.
Currently in India, share of long products in finished steel production is 43 percent. Out of the total production 44 MT of long products in 2016-17, the share of integrated steel makers was 32 percent and the balance 68 percent was from other players in the small and medium enterprises (SME) sector.
National Steel Policy, 2017 has indicated a capacity target of 300 MT of crude steel production by India by 2030-31. The finished steel demand by FY31 has been estimated to be at 230 MT, where long products' share has been projected at around 55 percent.
Since most of the long products such as reinforcement bars, wire rods, structural and railway products are used in the housing construction and the infrastructure sectors, therefore, development of these sectors would be the primary growth driver. The construction sector comprises of real estate (housing), industrial complexes, urban development (flyovers, bridges, malls, sewerage etc), smart city construction etc.