Tata Steel – Tubes Strategic Business Unit (SBU) was established in 1985 after the merger of the erstwhile Indian Tube Company Limited with Tata Steel. Over the years, Tubes SBU has emerged as one of the leading manufacturers of welded pipes in the country, with an installed production capacity of over 600,000 metric tonnes per annum.
Tubes SBU manufactures commercial, structural and precision tubes at its two plants, namely, the Standard Tubes Plant and the Precision Tubes Plant. We serve the customers, both in B2B and B2C segments through our focused presence in Automotive, Boilers, Construction, Infrastructure and Retail segment.
In an exclusive interview with SteelMint, Mr.Ujjal Chakraborti, Executive-in-Charge (E.I.C), Tata Steel Limited (Tubes) discusses the growth plans of the company and highlights the specific drivers needed to fuel demand for the Tubes Industry in the coming months. Excerpts:
Q. Considering the Pandemic and Lockdowns, how it impacted the Tubes demand; and how Tubes Division coped up and addressed the situation?
A. The pandemic in H1 was unique in nature. It not only uniformly impacted all sectors of economy, but also affected health and security of the population and had adverse impact on the morale of people. We ensured that all employees as well as other stakeholders like suppliers and even customers stay safe and not get exposed to the virus. We had to shut down all our manufacturing facilities, stocking points and logistics for over a month.
Gradually, as the economy and markets opened up, and demand started trickling in, we made sure that we were fully geared up to meet those orders, however small they were. In addition, we also participated with supplies of hollow sections for critical supplies, like for construction of emergency sheds, manufacturing of hospital beds and wheel chairs and even participated in construction of a steel structure hospital in Kerala.
Q. Any key learnings you want to highlight during this H1 period that made an impact on the operating philosophy?
A. While all the deliveries came to a standstill in April ‘20, we realized that we were sitting on over a months’ inventory in our system. We used this period to identify markets where those Finished Goods inventory could be used in the coming months, and subsequently moved the inventories there, closer to the consuming geographies. This was done with carefully monitoring of the districts, w.r.t. Red-Yellow-Green classifications, where movements were allowed.
Moreover, we intensified our presence on the digital platforms like Tata Steel Aashiyana (https://aashiyana.tatasteel.com), to reach out to consumers who were not able to visit their nearest retailer to buy hollow sections for their homes. This platform was already in place pre-Covid, but the lockdown period actually provided an impetus to our digital journey and today, almost 15% of our retail “Tata Structura” sales come from the digital medium. Both these steps have made us more agile to respond to our customer requirements.
Q. As mentioned earlier, you have achieved a good momentum in Q2. What are your views on demand scenario for H2 FY21?
A. Overall steel consumption in India had reached a level of 25 mn t per quarter in FY20 (India’s steel consumption was ~100 mn t in FY20). However, due to this pandemic, India has already lost nearly ~20 mn t in the first 6 months of the current financial year. Q2 FY21 was the period where the demand started coming back in few segments, which we could leverage. However, not all segments are likely to witness 100% recovery even in H2 period.
Automotive, which was the worst hit, has still not recovered to full production levels in all the segments. Many large infrastructure and construction projects too have not reached full level of activities, both due to labour and liquidity issues.
Many real estate projects continue to remain halted and even Individual house builders (IHBs) are cautious with their spending. Overall, we feel H2 FY21 would see overall consumption to recover to 80-90% levels; and if the subsequent wave of infections don’t hit India any more, the demand should be back to normal levels in next financial year i.e. FY22.
Q. Thanks for the insights on market side. Coming on the supply side, we all know Tubes Industry has been going through very tough periods with very low utilization level? Your views on the same & any inputs on how we can better the current levels?
A. Yes, as mentioned earlier the Tubes Industry is going through a period of low utilization. This is over and above the fact that country is having over-capacity of Tube facilities. While many capacities are inoperative, new capacities keep coming up due to low entry barriers. An increase in demand will help the industry to improve the capacity utilization levels.
Tube 3 Mills should also explore new applications of hollow sections wherever possible – in construction, for aesthetic purpose in buildings, even in high end applications in automotive and furniture segments. The industry is largely fragmented, where consolidation may be a solution for optimizing capacities, but given the current eco-system, that doesn’t look like a feasible solution. So, increase in demand looks to be the best possible scenario for the industry.
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