Recent coking coal price rise puts pressure on SAIL's operations

3 January 2017

Steel Authority of India Ltd (SAIL), the country’s largest state owned steel company said it managed to improve market share by 12.7% in 2016 even as the company is geared up to ramp up production capacity to 15 million tonne in 2016-17 and 17 million tonne in 2017-18, following its Rs 70,000-crore modernization. The company is focusing on restructuring its business model and reorienting its marketing strategy to make Brand SAILBSE 0.79 % the number one stop for customers' steel needs, chairman P K Singh said in his New Year address to its 85,000 employees.

This is an improvement over last year when SAIL’s inventory levels were high, production was sub-optimal and modernized units were not producing to the required levels, he said. “During 2016, we saw improvement in our market share by 12.7%,” Singh said. The company reduced unit cost of production, became EBIDTA positive for two consecutive quarters from April to September 2016, increased production from new and modernized units SAIL also achieved consistent sales of more than 1 million tonne (mt) and cash collection of more than Rs 5,000 crore, he said.

The SAIL chief said while the company celebrates these achievements, many more challenges still persist. “As we aim to enhance our saleable steel capacity to 20 mt, market competition too will escalate simultaneously as other producers are also increasing their capacities,” Singh cautioned. SAIL needs to embrace New Age Marketing as it will soon be in a position to produce and supply 20 mt saleable steel in market. “We have to take customers to that point where Brand SAIL can become their one stop for their steel needs. Tools of mass connect like social media should be leveraged to create that connect with consumers,” Singh added.

While agreeing that domestic steel industry is yet to entirely recover from the slowdown, he said World Steel Association, amid the forecast of tepid recovery in global steel industry for both 2016 and 2017, has predicted a handsome growth prospect for India. This optimism stems from the quantum investments planned by government in infrastructure and other steel intensive sectors. Low domestic consumption, at only 60 kg per annum compared to the world average of 208 Kg, gives scope to increase consumption. Justifying capacity augmentation which rightly matches this opportunity, Singh said SAIL aims to produce around 15 mt in FY’17 and 17 mt in FY’18 adding that the company has to set its sights, among other goals, on becoming the lowest cost producer world over.