‘Localization in supply chains could benefit us’
2 min read 27 Apr 2020, 01:47 AM ISTA lot of companies, including our customers, are sitting on inventory. It will take some time for it to flow out of the system, says T.V. Narendran, CEO and MD, Tata Steel Ltd
PremiumNEW DELHI : Steel producers in India are running their plants during the countrywide lockdown, but at much lower capacity as their customers aren’t operational yet. However, T.V. Narendran, chief executive and managing director, Tata Steel Ltd, and the vice president of the Confederation of Indian Industry (CII), said he is bullish on the medium- to long-term prospects of the steel industry. Edited excerpts from an interview:
What has the lockdown meant for the steel sector in terms of near-term impact?
Steel plants did have the permissions to operate, at least the integrated steel plants, because it is an essential product, as well as because it is a continuous process plant—you can’t just switch it off. But you can’t make steel in isolation. The critical consumables have to come in from multiple sources. The bigger issue for the entire industry, including Tata Steel, is that most of our customers are closed, whether it is the auto industry, the construction industry, the small and medium- sized companies. So, there was no point just producing if you are not able to sell. Everyone started cutting production, including Tata Steel. We could service the exports market. In the domestic market, it is about servicing very small requirements—for someone making hospital beds or somebody constructing a hospital or wires for the mattresses used in hospitals. It is more healthcare-related. So, the industry has been struggling with the lockdown, like all other industries. However, we believe that the focus of the government on infrastructure, on encouraging manufacturing, the trend of localization in supply chains after the covid-19 crisis—all of these will create opportunities for us in the medium- to long-term. We are bullish about these prospects.
How much have you cut production from peak levels?
We are currently at 40-50% levels in our main three sites in India. In Europe, we are at 70% levels because Europe is not under the kind of lockdown India is in.
How are the export markets functioning?
The markets are limited because many countries are under lockdown. Some of the traditional markets, such as Vietnam, which used to take in a lot of steel from India, is taking very little. Surprisingly, China has started importing. Bangladesh, the Middle East and, recently, southern Europe have started taking in some steel. Some markets are opening up but, obviously, not the kind of volume that is normal.
What’s the visibility on domestic demand?
Our customers need permissions to start operating their plants. There is some activity. LPG cylinder manufacturers are getting permissions; construction of hospitals are starting. Construction of roads will start soon in districts that are not affected. April and May will be months when companies will be starting up. A lot of companies, however, are sitting on inventory. Both customers, as well as ourselves. It will take some time for the inventory to flow out of the system.
What has been the impact of workforce migration on the steel sector?
Many steel companies, including Tata Steel, have workers in the premises or nearby. They stay in our townships. They are not migrant workers who come from far away. There will be challenges related to migrant workers when it comes to our customers. We are more concerned about the impact it has on them, and on our suppliers. We have many suppliers who are smaller companies and they employ a lot of temporary workforce.
