(Photo Caption: Essar Steel Pipe Mill.)
Essar Steel is a global producer of steel with a footprint in India, Canada, USA, the Middle East and Asia. It is a fully integrated flat carbon steel manufacturer – from iron ore to ready-to-market products. H S Bedi, CEO, Pipe Mill – Essar Steel India Limited told Sandeep Menezes that revival of the Western economies can harden the commodity prices however it will not make a major impact globally.
Excerpts from the interview:
Last year was tough with order books being low and prices under pressure across the pipe manufacturing industry. Going forward, how do you foresee the industry growth scenario?
Going forward, we are seeing projects being released in the Indian market. International markets like UAE, Iraq, Saudi Arabia, North Africa, Nigeria and Americas (including shale gas transportation and replacement pipelines) are showing increased demand for large diameter pipes for transportation of water, slurry, oil and gas. Also the signing of the $55billion – 4000kms pipeline between Russia and China – will directly impact the suppliability of Russian and Chinese mills in the international markets for the next three years.
Tell us about the main growth drivers for Indian pipe manufacturing industry?
The main growth drivers for the Indian pipe industry are:
-New government in the centre is expected to take decisions and clear major infrastructure projects in India.
-Notably the DSAW demand for gas pipelines will increase due to GSPL’s requirement of 900,000mt of LSAW/Spiral pipes for the Mehsana – Jammu pipeline.
-Increased demand for large diameter pipes for water pipelines.
-Availability of API grade steel from Essar, JSW, JSPL and SAIL will increase the cost competitiveness of Indian pipe mills and add to the growth the pipe industry.
There has been a slight revival in Western economies but at the same time increased opposition towards pipe imports from India. Comment.
It is correct that there has been revival due to demand in the Western Economies with the increase in Gas demand through the South Stream, TAP and TANAP pipelines. Continued political standoff between Russia and Ukraine and thereby European/US’s impending sanctions on Russia may move pipe suppliability from European and Japanese mills to Russian and Indian pipe mills who are qualified in all the three afore mentioned pipelines.
We are however not seeing any resistance towards pipes from India on the contrary Indian mills have booked large tonnages in Saudi Aramco, Shell/USA, Bechtel/Chile after tough competition from European and Japanese mills. Indian mills are aggressively booking orders in Iraq, Nigeria, Mexico etc.
Revival of Western economies can harden commodity prices, which will in turn hurt secondary manufacturers. Comment.
It is true that revival of the Western economies can harden the commodity prices however it will not make a major impact globally on the supply/demand scenario as secondary suppliers will switch to cheaper sources like China.
The Indian rupee has slightly stabilized after months of continuous slide. How has this impacted the pipe manufacturing industry?
Indian Rupee has since stabilized to earlier levels at Rs60.09. This will have an impact to the extent of the increase in cost of imported steel. However since most pipe suppliers usually hedge against such eventuality, the impact is expected to be negligible.
What is Essar Steel’s future business strategy in the pipes and tube segment?
Essar Steel’s future business strategy in the pipes and tubes segment would be to consolidate and increase value added pipes by adding another coating facility along with a bend manufacturing facility.
Going forward, Essar would be looking for acquisitions of pipe mills in various markets like MENA and Americas so as to increase market share.
Being a fully integrated steel player, does Essar Steel enjoy costs advantages vis-à-vis rivals in the pipes and tubes segment?
Correct. Essar being a fully integrated player can not only provide cost advantage but other advantages like earlier delivery besides consistent good quality.