'Future of steel lies in India'

TRADE TALK: J J Irani

J J Irani, director, Tata Sons, speaks to Rajesh Bhayani on issues that need to be addressed to see a better future panning out for the steel sector

With iron ore and call prices at higher levels and steel prices subdued, how do you see the future shaping up?

When steel prices started climbing up, raw material prices were moving in tandem "� at the same speed. But now, with raw material producers raising their prices, there is pressure on steel producers.

Steel prices "� particularly of products such as hot rolled coils "� have come down from $700 to $500 a tonne now, which is a comfortable level. Because of higher iron ore and call prices steel producers cannot slash their prices further.

I think steel prices may dip to $400 a tonne in a bad year and rise to the $600 mark in a good year. And this will be the range for the next two-three years. The future depends on how much steel producers can succeed in pressuring raw material producers to reduce their prices.

What are the threats and opportunities for the sector?

If China starts exporting steel in a big way, it will be the biggest threat. But the Chinese government is sensible and is keen on soft landing the country's economy. It is, therefore, discouraging local steel producers.

India is insulated from this, as the country itself is a big steel consumer. Even China "� the cheapest steelmaker in the world "� is not able to produce and ship steel to India at prices lower than ours.

All domestic producers have become more efficient now. I would say future of steel lies in India. Brazil produces cheaper steel, but that is on the other side of the world and, hence, it is not a threat to our country.

Iron ore is an important issue for us. India has huge iron ore reserves, of which 40-45 per cent is iron. These can be exported. But exports of iron ore with 60-65 per cent iron content should not be allowed.

This ore should be kept for local producers including foreign companies in the country, which currently produces 40 million tonne. It needs to produce 60-100 million tonne.

We are planning huge steel capacities, but do we have infrastructure to support that?

No. Infrastructure components such as power, water, ports, roads and rail links must precede the (capacity upgrade) projects. It can be developed with public-private partnership.

We are developing a port in Orissa for our project. Our Gopalpur project could not succeed for lack of proper infrastructure. We need ore for our new project wherever we start "� either Orissa or Chhattisgarh. Touch wood railway is doing good work.

What's your wishlist for the Budget?

Excise duties on steel need to be reduced at least for specific projects. I believe there is no scope to reduce customs duty now.