Wet blanket on further investment if imports not curbed: AM/NS India CEO

Surge in import of flat steel from China to India is roiling the large integrated steelmakers who have lined up big-ticket investments through this decade. Trapped in a downward profit spiral, steelmakers are asking the Centre to put in place trade and non-trade remedy measures to protect the domestic industry. In a video interview, ArcelorMittal Nippon Steel India (AM/NS India) director and CEO Dilip Oommen tells Ishita Ayan Dutt that things will only get worse if the government doesn’t act in time. Edited excerpts:

 

You were part of a steel industry meeting with Union commerce minister Piyush Goyal and steel minister HD Kumaraswamy recently. What was the ask from the industry?

 

The ask was that the industry needs to be protected. We need to make profits so that we can reinvest to grow, come up with new products and decarbonise to reduce carbon emissions. If we don’t make profits, how do we do it?

 

From being a net steel exporter, India has turned to be a net steel importer. The total import during April to September was about 4.48 million tonnes (mt) and export was about 1.93 mt. Due to the slowing economy in most of the countries and exports happening from China, our own exports have come down. And at the same time, imports are going up.

 

Some new capacities are also coming up in India. So, if imports are not curbed, certainly it will be a wet blanket on further investments in flat products in India.

 

The surge in imports is largely in flat steel?

 

Steel flat product plants are undergoing a massive margin squeeze; the results speak for themselves. There has been a significant drop in flat prices. Hot rolled coil prices have dropped by 15 per cent since the middle of last year and 38 per cent since April-May 2022.

 

This is due to the turmoil in countries where we were exporting to and a significant drop in the economy in China. We all know that there is significant over-production of steel in China. China is exporting to the tune of 120-130 mt, which is almost close to the amount of steel manufactured in India.

 

What is making the situation worse is that a lot of countries have put in trade barriers like the US, Canada, Europe, Turkey. Therefore, countries that have not put trade or non-trade barriers in place, will be flooded with steel either directly from China or through circumvention.

 

About 90-95 per cent of the steel that is imported in India is flats, longs account for a small percentage. Long product prices are relatively better because there has been a shortage of long products in India mainly due to a drop in production at RINL (Rashtriya Ispat Nigam Ltd). So it’s the flat product manufacturers that are suffering.

 

One other factor which is adding to the pain, is iron ore prices. While steel prices have dropped by 15 per cent from the middle of last year, iron ore prices have gone up by 20 per cent. It’s never happened before. So, the steel industry is going through a very big challenge.

 

What is the feedback that you got from the government on the issue of imports?

 

They have been receptive. We have said that things will get worse come January 20. The US will impose much more tariffs, maybe, 100 per cent on Chinese imports and they will probably put tariffs on many other countries. Therefore, the situation will get worse for India if we don't act in time.

 

As a flat steel producer, is AM/NS particularly disadvantaged?

 

Yes, we are totally into flat products. We have no long product manufacturing facility as of now.

 

You have set a target of 40 mt capacity. Could the surge in imports put your expansion plan at risk?

 

Why would anyone think of expansion if the industry turns out to be unprofitable.

 

Your expansion is a combination of brownfield and greenfield projects, how is it progressing?

 

By the middle of 2026, we will be doubling our capacity at Hazira (Gujarat). The upstream expansion will start coming into production from December next year and it will get ramped up from Q3 of 2026. We are looking at greenfield expansion in other states as well. But if things don’t improve, obviously we will need to have a relook at our plans.

 

If the import surge continues, is it possible that companies like AM/NS may look to expand outside India?

 

It’s a good question. But I think the place to grow is India. India has what it needs to grow this industry. But then the industry has to be profitable. With some tweaks in the policies, we are good to go. I am very hopeful that the government realises and takes steps before it's too late.

 

The Union Budget will be coming up in a few months. What is on your wish list?

 

The main point on the wish list is that this industry needs to be protected so that we can contribute to Atmanirbhar Bharat. We want to grow in India.

 

Any major economy is backed by a solid steel industry. The steel industry is the backbone of any economy. So, we necessarily have to grow. And for that all we ask of the government is to make the environment conducive so that we can focus more on innovation, research and development, product development and climate change. But all this requires us to be profitable.

 

You mentioned that steel prices dropped while iron ore prices increased during the same period. Isn’t it a global trend?

 

Not really, international iron ore prices have come down from highs to somewhere in between. Globally, whenever steel prices come down, iron ore prices also come down. But in India, we find that trend has undergone a change over the last one and a half years.

 

Iron ore production has to go up in the country. There are so many iron ore mines lying idle. The mine owners must be mandated to reach the MDPA (Mine Development and Production Agreement) target for those mines. And more mines should be brought up for auction so that the iron ore availability within the country goes up.

 

Also, we should restrict export of minerals and focus on increasing our manufacturing. In India, manufacturing is about 15 per cent of the GDP, it has a long way to go. If you look at the global manufacturing output, India is contributing only 2.9 per cent while China is about 31 per cent and the US, about 16 per cent.

 

So, you can imagine how much India has to grow in the manufacturing sector. The government needs to incentivise manufacturing in the country.

 

There is a consumption slowdown. Given that some of your end user segments are consumer-facing customers, how is the current demand scenario?

 

India is still in a good position from a consumption point of view. I personally believe that the second half of this fiscal will be better with the many elections and monsoons behind us. A lot of the Rs 11 trillion got back-ended, which means that we should see more of the government spending going forward in this financial year.