Outokumpu is an international stainless steel company based in Finland. The company, which employs some 8 000 people in more than 30 countries, produces a wide range of stainless steel products including hot and cold rolled, precision strip, tubular and long products. Yatinder Suri, in an interaction with Sandeep Menezes, discusses the prospects in the Indian stainless steel industry.
Despite having increased import duties on hot rolled coils, imports seem to be unaffected as the cost of imported steel is still lower than domestic prices. What is your opinion?
There are many reasons for imports of stainless steel. The import duty on stainless steel is 5 per cent and there are hosts of anti-dumping duties on imports. Despite these barriers, the most important reason for imports is non-availability of certain sizes, grades and quality levels which are so vital for our emerging infrastructure. The domestic manufacturing and R&D capabilities are limited but for the downstream industries the global opportunities are unlimited as long as they have access to the desired products.
Furthermore, the quality levels of stainless steels imported by end users directly are far superior to that of local products. End users find it profitable to import, process, fabricate and sell to domestic and global customers. The domestic availability and quality needs to be enhanced to make India self-reliant in the long term. There are global tie-up opportunities which Indian manufacturers must look at to improve their quality and reliability levels in domestic and global markets.
The per capita steel production is around 50 kg in India vis-à-vis 250 kg in China. Where do you see Indian steel demand going?
The per capita of stainless steel usage is less than 2 kg as compared to the Chinese average of 6 kg and global average of around 10 kg. The manufacturing share of our GDP is three times lower than China and more when compared to other countries. Those countries are exporting lot of equipment and finished products which are steel intensive and drive the per capita upwards.
If one compared the per capita on just consumer products for home use, we are comparable to most countries. For example, our utensils and homeware share in the total stainless steel market is as high as 60 per cent as against the global average of around 30 per cent.
I would salute the poor people in our bottom of pyramid (BOP) who are most intelligent to understand that using stainless steel brings them sustainability and lowest lifecycle cost. The enlightened engineering community and decision makers in infrastructure feel that stainless steel is expensive which is quite a paradoxical reality.
India loses close to 4 per cent of its GDP to corrosion. Sectors like oil and gas, energy and coastal road and railway bridges need duplex stainless steel applications to stop the leakage of our nation’s scarce resource from being wasted on maintenance. Even if we reduce 1 per cent of the loss, it amounts to lakhs of crores annually. Our planners and project owners need to wake up to this bitter truth for the sake of our nation. Lifecycle concept is an idea whose time has come.
The domestic long product steel market has been sulking for over six months under the burden of a slowing economy and infrastructure activity.
In stainless steel long products, India is most competitive in the world. In fact, close to 60 per cent of the domestic long products production is being exported to all parts of the globe with added value as bright bars. The capability of the long product sector is comparable to the best in the world. Many of the long products manufacturers are also producing alloy steels for the automotive forgings sector which is most demanding on qualitative aspects. So that explains why the long product sector is so bullish and global.
Currently, many of the rebars produced nationwide are not of desired quality and even the new BIS Code for rebars (IS: 1786-2008) allows improper rebars to be used instead of being rejected.
It is a fact that the carbon steel rebar quality from the unorganised sector is a major concern when we speak about the safety of structures being built with nonstandard carbon steel rebars. The government has to make it mandatory to sell only BIS marked carbon steel rebars produced by BIS approved mills only. The penalty for selling substandard rebar should be life imprisonment since the defaulter is playing with the lives and safety of millions of innocent buyers of non standard carbon steel rebars for their homes. The Gujarat earthquake had brought this subject to headlines but no lessons are learnt or visible corrective measures taken by the government.
Stainless steel rebars are emerging as an excellent sustainable solution for the concrete bridges in coastal areas. Since stainless steel does not corrode, the concrete continues to offer a maintenance free life of over 100 years. There are global examples to showcase this. Our planners must make use of stainless steel rebars mandatory in corrosion prone areas of the bridge. This would mean substituting just 5-10 per cent of the total rebars to be used in a bridge from carbon steel to stainless steel. The cost of the bridge project cost may go up by a 2-3 per cent but the life will go up to 100 years that too almost maintenance free.
Stainless steel is 100 per cent recyclable and does not degrade when reprocessed, allowing multiple lifecycles. Do you foresee use of stainless steel increasing?
Interestingly, the share of stainless steel production in overall steel production in India is more than 4 per cent, which is much higher than about 2 per cent share globally. But the per capita usage of stainless steel is very low. The stainless steel sector in India suffers from huge overcapacity and the emerging growth opportunities in infrastructure investments can see huge demand potential to consume the overcapacity over the next four years. Even a growth of 1 kg per capita from the current level of 2 kg can mean a demand surge of one million tons of stainless steel.
Outokumpu recently announced €440-million investment plans in stainless steel production in Finland’s Kemi and Tornio. Do you have any capex plans for India?
In 2008, we had decided to invest in India but the protectionist measures initiated by the government based on a petition of a single private sector monopoly led to deferment of the same. India is a big emerging economy and if there is an opportunity for us to contribute to Indian growth by localisation, we will be willing to evaluate them.
Kemi is the only chrome ore mine in Europe and Tornio steel plant is the most modern single location integrated plant (from ore to stainless steel). We use close to 90 per cent recycled raw materials in our melting shop and 80 per cent of the energy used is from renewable sources. No wonder, we have the smallest carbon footprints in stainless steel products in Europe.
What is Outokumpu’s longterm strategy in India?
We have been lauded, recognised and rewarded by the end user industry, and associations and business platforms for bringing the most modern and innovative stainless steel products and applications to India. Our innovative products have made Indian end users competitive in the global markets and even the domestic industry has gained knowledge from the products and applications which India is not capable to offer currently.
We are the global benchmark in sustainability on the Dow Jones sustainability index. Even our competitors respect us. International Stainless Steel Forum (a body of global stainless steel producers) did so by giving the first sustainability award to Outokumpu.
Our in-house research and development on products and processes has led to development of many new grades. Being the oldest and emerging leader in stainless steel, we have so much to offer to India. The nation needs us and we are ready to do our best to build Stainless India.