INDIAN STEEL industry is the world’s most profitable industry, opined $ 2 billion worth JSW group promoter and member board of governors Indian Institute of Management, Indore (IIM-I), Sajjan Jindal. He was delivering the valedictory address at the conclusion of the four-day management event ‘SBI-IRIS-06” on IIM-I campus on Sunday.
Jindal said that steel production would veer round India, China, Russia and Brazil. India has the innate advantage of being at the bottom of the price curve and having a growing demand in home itself, thereby providing a ready market.
The high import duty of 102 per cent in place during the 90s has been reduced to just five per cent, thanks to liberalisation. What happened in China 20 years ago is happening now in India and it will give competitors a run for their money.
The global steel industry is highly cyclical, very competitive and still fragmented in terms of market share. Currently, the industry is at the height of the business cycle and is going through a consolidation phase, which might result in the smaller players being acquired by the larger ones.
The total output from the industry exceeded 1.4 billion tonne in 2005, most of it augmented by the increase in output from China, which is expected to increase further, making steel output from China amongst the largest in the world.
The steel industry demonstrates a high degree of variability, both in terms of earnings and production.
The factors attributable for driving this variability are global economic conditions with a particular sensitivity to the performance of the automotive, construction, capital goods and other industrial products industries.
The commodity nature of steel, the producers and consumers limited control on price, and the demand and supply disparity have made steel prices volatile. Significant increases in prices for metals and energy over the past two years have also contributed to increased variability in the industry.
Companies in more mature industrial countries are increasingly forced to look to assets (and growth) by setting up production operations (steel factories) in key developing economies that places then close to natural resource supplies (both in terms of inputs and energy).
Industry consolidation is emerging, as a major trend as companies have cash but the industry is fragmented and therefore, new strategies are needed to tap growth areas in emerging markets. He said that Tata Steel plant has a production capacity of five million tonne/ annum, and Bokaro and Bhilai that of four million tonne/annum, while his plant would soon be upgraded to 10 million tonne capacity.
He advised the students to dream big and said, “you dream what you think”. He recommended them to get into more entrepreneurial jobs rather than into straight-laced services. He advocated strengthening institutes of higher education in the country and said they were a major factor in the rise of the US.
IIM-I Director Dr S P Parashar welcomed the guest and said that IRIS has been ‘a learning by doing, while having fun experience’ for students. Umesh Shahra from Ruchi Soya was also present on the occasion. ‘IRIS’ coordinator Deepak Agarwal proposed the vote of thanks.