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The Indian stainless steel industry is being challenged by rising imports and raw material issues. Jindal Stainless Limited (JSL) is among the top stainless steel manufacturers in India. Vijay Sharma, Director, Jindal Stainless Limited spoke to BE’s Kuntala Sarkar regarding the current scenario of the stainless steel sector in India.

Q) How has the scarcity of raw materials for the stainless steel industry impacted your organisation?

A) The Indian stainless steel sector is largely reliant on imported raw materials due to their lower domestic availability. Major raw materials required for stainless steel manufacturing are nickel, nickel-based alloys, stainless steel scrap, ferro alloys and ferrous scrap. Owing to the scarcity of these raw materials, not only does the cost of material inevitably increase, but there is also a further increase in associated price and forex risks. This also leads to a higher working capital requirement for funding additional inventories, thereby impacting the entire industry and its operations. More than 50% of the raw material required by our organisation is catered through imports.

Q) Is the sector facing challenges due to increased import duties?

A) The major stainless steel producing countries, namely, China, Japan, Korea, and ASEAN nations like Indonesia and Malaysia are laden with excess capacities. India stands victim to dumping of material by these countries by utilising the existing trade agreements. Moreover, the increasing protectionist measures taken by economies like the US, EU, Indonesia, China, Taiwan are bound to impede the growth of world trade. Consequentially, the industry is witnessing several challenges. As both European and the US markets are now effectively blocked out, there is a loss of volumes and profitability for the domestic stainless steel manufacturers. Since the imposition of US 232, wherein the US government imposed a 25% duty on imports of steel, the exports to the US have dwindled in absolute terms. India’s exports to the US reduced by 71% in 2018-19 for stainless steel products. The zero duty benefits enjoyed by Japan and Korea on stainless steel under the India-Japan and India-Korea Comprehensive Economic Partnership Agreement (CEPA) have led to a sharp rise in stainless steel imports and high trade deficit. Additionally, major stainless steel producers like China, Japan, Korea, and ASEAN countries (Indonesia, Malaysia, Thailand and others) are targeting the Indian market due to its large size. The share of the ASEAN region in India’s imports of stainless steel flat products has increased from 6% in 2017-18 to 32% in 2018-19.

Q) As a leading player in the segment, how do you react to the latest budgetary allocations?

A) The domestic stainless steel industry had expected a higher level of protection in form of increased basic customs duty (BCD) on imports of stainless steel finished products from 7.5% to 12.5%. Given the prevalent protectionist measures taken by leading economies, this step would have translated into stimulating production growth. We are confident that as the future metal, stainless steel will be a key ingredient of achieving the $5 trillion economy.

Q) The Indian economy is currently in a downslide. Did you reduce your production?

A) Given the ongoing economic challenges, various sectors relying on stainless steel have not been untouched. Automobiles and other consumer-facing products are in decline. Moreover, due to an unhindered export of stainless steel products by other nations, the domestic capacity utilisation is stagnant. As of now, even exports are not yielding high profits. Jindal Stainless offers a diversified product basket which finds applications in varied sectors. This strategic arrangement helps us to mitigate sectorial risks as far as market downslides are concerned.

Q) How are you focusing on enhancing the quality of your production?

A) Jindal Stainless has adopted the internationally recognised quality manage-ment system (ISO 9001) that not only helps it in becoming cost-competitive but also aids in increasing the brand’s credibility and lowering costs through effective use of resources. We have a full-fledged Research and Development (R&D) wing in Hisar, which is dedicated to developing new grades of stainless steel and improving performance of existing grades. R&D plays a pivotal role in retaining and consolidating Jindal Stainless’ leadership position in the stainless steel industry.

Q) Tell us about your expansion plans?

A) We plan to increase the melting capacity at our Jajpur facility from 0.8 MT to 1.1 MT through de-bottlenecking and process balancing by the next financial year. The increase in capacity would require a capex of around `40-50 crore, which will result in a production increase of 12-15% over the next 2-3 years. It is also focusing on increasing the capacities of value-added products as the company plans on doubling its precision strips’ production capacity from approximately 14 KT to approximately 28KT with an estimated capex of about `170 crore. This is expected to commission within FY21.