Steel, ferroalloys: Is protectionism an answer?

Recently, global body World Steel Association (WSA) in its report said, India has been projected to consume 96 million tonne of steel in 2018 which would rise up to 102.8 million tonne in the current year and would grow up to 110.2 million tonne in 2020. Infra sector would continue to be country’s leading demand driver in the next few years. 

A deceleration, however, in the pace of construction in roads, rail and metro rail connectivity, dedicated freight corridors, industrial corridors, upgradation and construction of existing airports, ports upgradation and mechanisation, shipbuilding, rural & urban infrastructure, real estate, etc, in the next few months would indicate major obstacle to projected demand volume of steel for a short period and then picking up the momentum again. The phenomenon has been regularly observed in the economic growth of several developed countries. 

It only insinuates that incremental usage growth of 14 million tonne of finished steel over the coming two years is not likely to follow a uniform growth pattern. It will only exceed once the rate of infrastructure and construction growth accelerates  after the election process. 

Now, coming to its derived sector ferroalloys, the industry has been grappling with major issues like the shortage of raw materials and high power prices, according to leading 

producers. Power costs contribute to about 50 percent of the total ferroalloys production costs. Steel ministry has been urged to ensure regular availability of essential raw material like manganese ore, chrome ore, coke, etc. for the industry to survive in the long run.

Primary producers apparently look to be dependent on economic nationalism compelling government to raise import barriers and also persuading the automotive sector (a leading consumer) to use domestic alloy steel making it conducive for them to access local market.

Excessive spoon feeding by government will only lead to favouring the domestic steel producers leading to hike in prices. Higher steel prices hurts downstream sectors like automotive industry that add much more value and create more jobs. For example, sectors like automobile, components manufacturing, construction etc are already struggling with slowing demand and rising input costs and any raise in steel prices is likely to add to their woes. 

For the industry to survive globally, the domestic steel makers need to stress on moving up the value chain where quality & services are given utmost importance and encourage exports of steel-intensive value added products like engineering goods. This augurs well for the overall health of the economy.