The country's largest steel producer, Steel Authority of India (SAIL), expects a recovery in steel prices but not to previous highs. S K Roongta, chairman of the public sector major with a saleable capacity of 13 million tonnes, tells Ishita Ayan Dutt about the strategies adopted to tide over the crisis and industry scenario in the near term.
Steel prices have crashed. When do you expect the situation to improve?
I expect the situation to start improving, but it won't come back to the pre-crisis levels. I do not see peak levels of July, not in the immediate future.
Raw material prices are also falling, so will your margins be secure next year?
It is impacting our margins because raw materials are bought on long-term contracts and the prices of finished products have declined. Let us see how things work out next year.
Has SAIL cut production?
We have not cut production. We are producing according to our orders, which is what we always do. But we have re-oriented our product-mix in certain areas where we don’t have adequate orders and try to produce other products. The slant is towards more special grade products, which can impact the overall volume a little bit.
Is the re-orientation a temporary phase to tide over the crisis?
It is an ongoing thing. When there is adequate order in all areas, then the tendency is to do what is easier to produce but in difficult times, you do what you might not have done in the past.
When do your company see the cycle turning?
It is very difficult to say because it is a worldwide problem this time. It is related to the general economy and the manufacturing sector.
Globally all major steel producers have cut production, so do you see a shortage in the coming months?
No, I don’t see a shortage. When demand re-emerges then production can always be restarted. Shortage happens when demand is more than the capacity to produce.
Steel scrap and some long-product prices have moved up recently. Can that be taken as a positive sign?
You can say it is a positive sign but must be put in context. It had come down to very low levels, rock bottom. So still they are much below peak levels.
Have prices bottomed out?
Can’t say. But given the structure of the steel industry worldwide, probably they can’t afford to sell at prices below these levels.
You had compressed the timeline for brownfield expansion…does it still stand?
Our current expansion till 2011-12 targeting 24.5 million tonnes is on track, but we had made plans till 2020, which is being reviewed given the current scenario.
