Hope to see stability in raw material prices in 2017 - Mr Ravi Uppal JSPL
In an exclusive interview with ET Now Mr Ravi Uppal MD and Group CEO of JSPL said that he expects India Steel industries to return normaly by next quateres.
ET Now - As we look back I am sure you are happy with how things have transpired in 2016, they have been a lot better than what they probably were at the start of the year. Do you think the run rate, the momentum, continues into 2017, what are the key factors for this?
Ravi Uppal - Well you know that we on the whole have a very positive outlook for the Indian steel industry in 2017. The pace has picked up from the start of the third quarter, then of course in the month of November there was a setback due to demonetisation but I think things are again picking up and I am sure that by the middle of the next quarter that the Indian steel industry should get back to business as usual. I think globally also the steel industry has started to look up with the exception of China, I think the rest of the industry is expected to grow by more than 1% next year and United States, Europe, Canada and rest of the Asian countries are also expected to grow between 2-2.5% next year.
India, which has grown until the end of November by 3.5% the domestic consumption is likely to see that this growth will go up to 4-4.5% by the time we conclude the current financial year and as we get into the next year we expect that the growth should be in the range of 5-5.5%. So all put together you know it is a good news for Indian steel industry. Of course 2016 has been a very volatile year for the steel industry, sometime we thought that demand is looking up then there was always something which brought it down and you know the prices of raw materials have been changing very rapidly.
You know the prices of coking coal and also alloying materials, they had seen a major increase starting from August till about November end. Now of course the coking coal prices have started soften a bit but I think all total the market witnessed a lot of activity in the movement of raw materials. So let us hope that starting from early next year there will be stability in the prices of the raw materials and the prices of steel will also see the semblance of stability in them. But on the whole I would say the Indian steel industry should look up to 2017 as a good year.
ET Now - There are two ways to look at the current commodity cycle; things were beaten down in 2015, there were no inventories and now things are coming to reasonable level and a fresh inventory cycle has started, that is one. Second, this is just reflex action, prices have gone up but demand is not there. So what is your assessment of the situation?
Ravi Uppal - Well you know I have a slight disagreement with what you just said that there is no demand. I think if you look at the steel industry, the demand has come from three sections; number one the demand by itself grew by 3.1% from April to November, the domestic demand I am talking about. The second is the imports came down by 39% in the first eight months. The exports have gone up by nearly 53%. So these things added together that is increasing exports, dropping imports plus the organic growth of the domestic consumption, all three added together saw that the Indian steel industry was rolling out more volumes. The total steel production up to November has gone up by 10.6%. Of course the primary producers have gained more because their numbers have gone up by 14% but as against that secondary players; their growth has not been as pronounced that was in the range of 1.5%. So but all total I think the volumes saw a good double digit increase. Let us just hope that this kind of volume growth continues next year when the organic growth will pick up.
ET Now - So 2016 in a sense has been a decent year for the steel industry, the MIP was imposed, the antidumping duty was extended, steel industry which was suffering because of overcapacity now seems to enjoying a natural advantage but given that you will have a new administration in US and the tax laws, trade barriers, trade treaties would be changed, what will happen to this moat or this unnatural protection Indian steel industry is enjoying?
Ravi Uppal - Well you know the Indian steel industry the protection has also been withdrawn, if you look we started in February 2016 with MIP on about 171 items and now the MIP has been reduced to just about 19 items. Some of the items have been taken away from the MIP list the simple reason being that the international prices also moved considerably and they were not seeing as much of threat therefore there was no need to put up any barriers.
But for certain items the government did keep in place the antidumping duties which are also going to get scaled down over a period of time. So I think the government did foresee the need for putting some kind of protection against predatory pricing by the overseas suppliers particularly from China and Korea but I think over a period of time the Indian industry will also get back on their feet firmly and their products will also become more competitive. So I think the antidumping measures taken by the government were very much in time and I think it was a good move but the industry is going to getting their act together to see that they can fight on their own.
So I think US there is speculation that with Mr Trump assuming the office that he is going to put lot of focus on renewal of the old assets and infrastructure and the infrastructure activity in particular is going to pick up that basically means the steel demand is also going to pick up. And so seems to be case in several European countries which are also contemplating putting lot of money into the renewal of the infrastructure assets.
ET Now - That is that about the industry is likely to do in 2017 but tell us where you at JSPL stand as of now, what is that we can expect from you given how the current environment is, given what the projection for 2017 is, given your product portfolio in terms realisation as well as EBITDA per ton what is the best and the worst that we are looking at for 2017 from you?
Ravi Uppal - Well you know for us up to the second quarter things were very challenging but since the start of the Q3 things are looking up. Like the rest of the Indian steel industry we are also benefitting from upsurge in the domestic demand, our production has gone up, even in the difficult quarter like Q2 our production had gone up nearly 11% and in this quarter I am expecting that the volume should pick up even more. And of course the margins still remain a challenge for the entire steel industry.
They have improved compared to what they were earlier because Q3, Q4 are generally the busy season, business season in India and therefore the prices have risen but the question is if the prices are rising the raw material costs are also rising what is the take for the industry, I think that remains to be seen. So I feel that Q3 and Q4 should generally be better quarters compared to what we saw in Q1 and Q2. That is true of the industry as a whole and I think JSPL is included in the same way.
ET Now - Do you have any near term plans to sell stake or raise funds by any other method because as I understand you do want to infuse equity in the company and apparently you are in talks with foreign investors for the same as well, any timelines that you would want to share here?