With most of the upcoming steel plants in the country going for captive production of ferroalloys and global demand for the product showing signs of slump, the ferroalloys manufacturing as a stand alone business faces a bleak future.
This was warned by experts who took part in a national seminar on ferroalloys industry here today. The event was organized by mjunction, a eCommerce company, promoted by Tata Steel and Steel Authority of India (SAIL).The manufacturing of ferroalloys is part of the integrated steel projects proposed by Jindals, Bhusans and Tatas. Even big ticket investors like Posco and Arcelor Mittal intend to go for captive production of ferroalloys or may go for imports of the product to meet their requirement.
This is expected to affect the sales of domestic ferroalloys producers who thrive on supplies to steel industry and their entities, as a stand alone business, is likely to come under severe stress, said N R Dash, Director, Ministry of Steel, Govt. of India.He said, most of the ferroalloys units in the country may either merge with larger steel plants or may go for forward integration to make steel for their survival.
The ferroalloys capacity in the country at 3.6 million tonne (which is enough to support 150 million tonne of steel output) is much above the demand. The production at 2.4 million tonne represents a capacity utilization of less than 70 per cent. Nearly 80 per cent of the production is sold in the domestic market with the rest 20 per cent being exported. Slump in the global demand is another reason for the low capacity utilization, Dash said.
He, however, ruled out the possibility of the Centre increasing import duty on ferroalloys as a protective measure for the domestic manufacturers, who had been demanding for raising the import duty bar to at least 7.5 per cent from the present level of 5 per cent (at par with other steel products) to fend off competition from the ferroalloys producers from abroad.
The ferroalloys import at present is very minimal and there is no strong argument to raise the import duties, he said.
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The steel ministry official, however, informed that the government is considering a demand to bring silica manganese to unrestricted category from restricted category.
Dash was optimistic about demand growth in steel, a complementary sector of ferroalloys industry. Demand for steel is expected to be more than 10 per cent over the next few years, he said.
Though the last two months of the current fiscal has seen increase in imports, he hoped new capacities would come up soon to meet the domestic steel demand. By next three years, the capacity is expected to be more than 100 million tonne (now the capacity is 72 million tonne) riding on the back of brownfield expansion to the tune of 36 million tonne.