Icra advises steelmakers to enhance efficiency

The Indian steel manufacturers will have to improve operating profitability to withstand all phases of steel price cycle, said ICRA performance review during the first half of the current financial year.

The report said that this was expected through varied measures such as, implementing cost control measures, enhancement of capacity utilisation, improvement of operational efficiencies, altering the product mix for maximising share of value-added products and targeting niche markets.

On consumption front, growth prospects would be governed by end-user sectors like construction, infrastructure, white goods and automobiles.

The report said, the sectors had recorded sluggish growth in the past but were showing signs of pick-up.

However, in the medium term, with the revival of the economy, the performance of these sectors were likely to improve further and would improve the market prospects of the steel industry.

The report points out that relatively higher costs of infrastructure (transportation and power costs) and the prospects of tariff reduction remain the key concern areas of the Indian steel industry.

The steel sector was largely fragmented and had a massive financial burden of Rs 4,000 crore. The financial institutions had already restructured debt amounting to Rs 2,000 crore.

In the international market, overcapacity in the industry estimated to be around 70 million tonne, was expected to reduce but, would persist in the near future.

The capacity utilisation of the steel firms was likely to increase resulting in improved profitability. Indian steel firms were expected to follow the global trend.