KOLKATA: Tata Steel expects steel demand to bounce back in the second half of the fiscal year, led by segments like passenger vehicle sales, construction and rural homes, in what perhaps marks the first upbeat remark from a top manufacturer about the domestic steel market that has been sagging for a year and half.

“We see the steel sector picking up during the second half riding on auto, construction and rural demand. Indian demand should be met out of Indian production of steel. Imports are not the best way for it,” vice president for steel marketing and sales Peeyush Gupta told ET in an exclusive interview.

The automotive sector accounts for nearly 18% of Tata Steel’s sales by value. A revival in the sector — sales have been strong for car and two-wheeler makers for several months now and they are expecting a bumper festival period — is making the company upbeat about demand from that sector. In commercial vehicles, order books are full in segments like excavation and mining equipment.

State and central government funding in infrastructure and construction, particularly in flyovers, bridges, airport terminals and roads, is expected to see a rise, with the railways too likely to add to the construction boom. “Since steel accounts for 50% of construction, we are betting big on it to raise overall demand,” Gupta said.

“The rural market is doing well, particularly in the individual homebuilding segment where steel accounts for some 12-15% of cost, with growth also picking up in Tier 2, Tier 3 and Tier 4 towns,” Gupta said. In rural and in semi-urban and urban areas in top 40 towns including places like Rohtak, Gorakhpur or Kanpur, Tata Steel expects a spurt in sales of its branded galvanized corrugated sheets for roofing, along with tubes and bearings. It also expects demand from segments related to agriculture. However, in Tier 1 cities, where the builders or promoters are mainly involved in residential segment, demand is yet to pick up.

“Retail and branded steel now account for 45% of our sales by value compared to 2001 when it accounted for only 5% of sales. In this, the SME segment is critical for us since it accounts for nearly 20% of our branded retail sales by value. We have systematically targeted them since they want the steel to come to them,” Gupta said.

Traditionally, the SME segment has been underserved by the steel industry. Tata Steel has created a separate distribution channel for it and also introduced watermarking of steel to add to its authenticity. It is also going deeper into villages with hardware shops located within a 5-10 km radius. Expansion to capacity, like addition of a thin slab caster, and the new Kalinganagar plant in Odisha is poised to reduce the company’s commodity play further.

Share of value-added products, which now contribute some 10-15% of sales, is set to go up further with special quality steels for gas cylinders, oil pipes, medium carbon pipes and high-end engineering being added to its portfolio. An emphasis on value engineering, where Tata Steel is a collaboration partner for auto companies in design and prototyping, is also set to increase its share in automotive segment from the current level of 18%.

“India is a good place to make cars since it has the right ecosystem in terms of technology, talent and policies,”

Soources :thehindubusinessline.com