Consolidation within the industry is the need of the hour as it might generate benefits of economies of scale and improve labor productivity.

Buoyant scenario:The Indian steel industry is in its best shape ever. Both the long and flat product industries are thriving. Companies across value chain, be it in the met coke, iron ore, pig iron, sponge iron or alloy steel, are doing extremely well. This is largely due to the domestic demand buoyancy as well as the huge Chinese consumption, which is causing the global prices to rise. Another reason for this situation is the buoyancy in the capital goods industry, automobile industry and consumer durables where the demand for steel is high and is growing at higher rate. Further, India has also established itself as a quality steel exporter and that is also increasing its prospects.

The global steel prices have run up significantly over the past 2 years due to increased Chinese demand, which has grown by more than 20% over the last 2 years. The domestic prices have also moved more or less in line with international steel prices.

Uncertain and difficult past: Indian steel majors had been suffering from high cost of production and high debt equity ratio in the past. With steps initiated by steel majors to control fixed cost, restructuring debt due to low interest rates and repaying high cost debt, most steel companies are back in the limelight. However, going forward, the key beneficiaries within the industry will be the large integrated players who have a global presence and a better product mix.

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