Steel companies focus on value-added products to beat pricing pressure

Hit by large-scale imports and fall in traditional product realisation, leading steel companies are focusing more on increasing share of value-added products and pushing up sales to MSMEs through online.

The US government has already levied an import duty of 25 per cent on steel and made it even more difficult for Indian companies to tap those markets.

Steel companies profits have been under pressure as the cheap imports have put pressure on domestic steel prices amid weak demand.

Utsav Verma: Head of Research – Institutional Equities, Choice Broking said steel imports into India were up by 16 per cent to 8.1 million tonne in last nine months, mainly as a result excessive exports from China and other countries.

“Over the last one year steel prices have been weakening in India and globally and resulted in EBITDA and EBITDA per ton have been declining gradually over the last four quarters,” he added.

In this back drop steel companies are betting big on launching newer products that targets to substitute imports.

ArcelorMittal Nippon Steel India recently commissioned two modern Continuous Galvanizing production lines dedicated to manufacturing advanced automotive steel products at its Hazira plant in Gujarat.

The initiative builds on the success of Optigal and Magnelis introduced by AM/NS India.

Ranjan Dhar. Director & Vice President – Sales & Marketing said the automobile industry can source its entire requirements from the domestic markets and stop imports completely after series of products introduced by the company.

All the products introduced will match the quality standards of parent companies – ArcelorMittal and Nippon Steel and some of them will be manufactured for the first time in India, he added.

The government’s PLI Scheme expanded in 2024 to include advanced alloys and high-strength automotive grades has helped India to reduce reliance on critical imports.

While geopolitical and pricing threats persist, the strategic emphasis on import substitution has the potential to foster long-term sustainability.

Besides value added and speciality products (VASP), some of the companies such as JSW Steel and Tata Steel has been focusing on ramping up capacity and using alternate sales channel to target Micro, Small and Medium Enterprises.

JSW Steel reported that its VASP sales in domestic market, was up 13 per cent in December quarter and accounted for 60 per cent of the overall sales.

The company had opened 280 JSW Shoppe and JSW Shoppe Connect stores in this fiscal and enhanced its overall branded stores to 2,339 from 2,059 in FY’24.

It has 739 JSW Shoppe across urban areas and 1,600 JSW Shoppe Connect in semi-urban and rural areas besides 28 experience centres across India. Enrollment of partners in JSW Privilege Club had crossed 1.06 lakh.

JSW One, the online platform for steel products, has crossed GMV of Rs 14,000 crore, a growth of 2.7 times from last fiscal. JSW One Finance, the NBFC business launched last August, had distributed Rs 930 crore GMV credit to buyers in December quarter.

Puneet Singhania, Director, Master Trust Group said the integration of online sales channels is emerging as a strategic enabler for steel companies to expand their market presence.

By leveraging tech and digital platforms, firms could streamline procurement processes for MSMEs and geographically dispersed buyers, he added.

Further, including AI and machine learning will help to improve analytics to ascertain demand and customer preferences, he said.

Online platforms will become a critical tool for sustaining growth in an increasingly competitive and margin-sensitive steel market, said Singhania.

Tata Steel’s Aashiyana, an online platform for individual home builders had registered 37 per cent increase in GMV in last nine of this fiscal and registered a dealer base of over 11,000. Sale of Tata Tiscon, the TMT bars used for home building, has jumped 20 per cent y-on-y in this fiscal.

With the US criticising India on trade protectionism, the Government needs to have a strong reason to increase import duty on steel and support the efforts of steel companies.