Steel companies reorient strategy to capture rising rural demand

The better performance of the rural economy has prompted domestic primary steel producers to reorient their marketing strategies ahead of the festive season.

While some companies have chalked out a relatively long-term plan to increase market penetration, others are seeing rural demand bounce back to pre-Covid levels. 

The agriculture sector recorded 3.4 per cent growth in the April-June quarter, compared with 3 per cent growth a year ago, said a CARE Ratings report. Barring agriculture, which accounted for 18 per cent of gross value added (GVA), all other sectors saw contraction, it said. 

“We are seeing positive demand in the rural markets for tractors, followed by motorbikes, which are already at pre-Covid levels. Hopefully, the pre-festive period will add to this demand in the coming weeks,” said a spokesperson for Tata Steel in an emailed response. 

Sajjan Jindal-led JSW Steel, saw 15 per cent year-on-year (YoY) growth in flat steel output in August at 9.8 million tonnes (MT), indicating a pickup in demand from the auto sector. It rose 4 per cent sequentially, the company said in a press release. 

Production of long-steel products, however, declined 20 per cent in August to 2.32 MT, compared to the corresponding period the previous year. “We have plans to expand the Hypermart chain and will be making additional investments in the coming months,” Ranjan Dhar, chief market officer at AM/NS India, told Business Standard, adding that the budget for this is still under discussion. AM/NS, formerly Essar Steel, is now a joint venture between ArcelorMittal and Nippon Steel, and Hypermart is the firm’s retail chain. 

Apart from network expansion, AM/NS will also implement market-specific branding and promotion strategies for deeper penetration. 

“It could be hoardings, advertisements via radio stations, banners, anything that works for that specific (rural) market as a branding effort we will roll out,” said Dhar. 

Housing demand in rural areas has remained strong, said industry officials, as the pandemic has not affected these areas as much as urban ones. This is spurring demand for rebars (used in construction), said V R Sharma, managing director at Jindal Steel & Power. 

“Also, districts that have been impacted by floods are witnessing strong demand for long-steel products to replace common infrastructure such as roads, bridges etc,” he said. The firm has started a seven-day service-on-call facility to increase its reach in remote regions.

“We have set up centres in Delhi and Ranchi and through a toll free number enquiries can come to us and will be addressed in 24 hour by the marketing team. This is gaining sizeable traction along with our effort to expand dealership,” said Sharma. 

Sharma was also of the view that with migrants having returned to their villages, most are looking for local employment mainly in the construction segment, which is also providing an impetus for housing construction.