Up & downs in market prices and pricing power absence are likely to slips down the 2025 target of steel production in India.
Up & downs of market sentiments and lack of pricing power raises a question for India over its plan to achieve 300 MnT of steel production by 2025, which is a barrier for India to be the world’s 2nd largest steel producer.
“Pricing power is an economic term that defines an extent to which a company may raise prices without reducing demand for its products.”
Currently, the pricing power absence in steel industry has become a matter of serious concern. Pricing power is critical for industry growth and profitability depends on its ability to consolidate. Steel industry in India is highly fragmented, therefore it lacks pricing power. In India, SAIL & JSW accounts for not more than 12-13% of market share, but the products are totally market-driven due to lack of pricing power.
In India, around 55% steel production is for Flat products mainly used for electrical, automobile & engineering purpose and rest 45% is for Long products, majorly used for construction activities. It is worth noticing that about 74% of market share is held by secondary players of Long products.
Uncertainty in the government policies might also account for slips in target. In India, government had issued many firm policies that have reinforced the steel industry. Few policies based on illegal mining, environmental issues, labor issues, rise in export duty & freight charges have taken investors on back foot. The imposition of 5% export duty on Pellet export has also put an adverse effect on exports. There is need of clarity in government policies.
Steel demand is low in India compared to steel consumption all over the world. It is expected that the steel demand may rise based on few factors like removal of bans on Iron ore mining in coming days and new government policies.