ArcelorMittal Nippon Steel India (AM/NS India), with a significant market share in automotive steel, is looking to further develop this space with new CR production lines. Its efforts in the same will be driven from its flagship Hazira plant. The Kendrapara facility in Odisha in the pipeline will make upstream flat products for automotive applications, but the finishing will be predominantly done at plants in western India. The company is leveraging the experience of ArcelorMittal and Nippon Steel to offer specialized products for Indian customers. Speaking exclusively to SteelMint, Alain Legrix, Director & Vice President, Sales & Marketing, AM/NS India, said the volatility in prices will remain as long as the international situation and challenges continue, and that as long as export duties remain, the Indian steel industry will have no other choice but to limit production like it has done recently.
Excerpts from a free-wheeling interview:
a) What is the share of automotive steel at AM/NS India? What plans are afoot to increase this share, going forward?
ArcelorMittal Nippon Steel India (AM/NS India) has a diversified product offering, coupled with its wide distribution network and Research and Development (R&D) centre, enabling it to maintain strong relationships with customers, including automobile manufacturers.
AM/NS India has gained a significant market share in commercial vehicles, auto components like wheels, and pressed parts, etc. We are still developing our offerings in the passenger vehicles segment, and this will be further developed once we have our new production lines for cold rolled via continuous annealing and coated steel solutions.
The process to offer these products has started and we are leveraging the expertise and experience of our parent companies – ArcelorMittal and Nippon Steel – to bring more innovative and globally benchmarked automotive steel to our customers in India. We have a clear, long-term strategy and a framework to expand our market share in the auto segment.
b) You will have a new 12-mtpa plant coming up in Kendrapara in Odisha. What sort of automotive steel production plans are there at this plant?
Our efforts in the auto segment will be driven from our flagship plant in Hazira, Gujarat and the specialized lines for this business will be based in this location. Our intent is to make Hazira the primary specialized hub for auto products based on the specialties from ArcelorMittal and Nippon Steel.
At the Kendrapara facility in Odisha, we will make upstream flat steel products for automotive applications, but the finishing will be predominantly done at our plants located in western India.
c) Automotive steel comprises around 10% of total steel demand. Going forward, it is heard the tonnage will decrease although specifications will remain same. Is this a challenge for steelmakers?
We foresee three trends, going forward. First, we think the steel intensity per vehicle (steel content per vehicle) will decrease by 4-5% by 2030, due to new regulations in safety protocols and emission control.
However, and secondly, in the passenger vehicle segment we may see a shift towards utility vehicles from small cars. A small car uses on average 500kg per vehicle whereas a utility vehicle uses 950kg.
Thirdly, in addition to the incremental growth brought about by the expansion of the auto market, we will also see a shift in the usage of the type of steel. Cold rolled and drawing qualities will be substituted by high-strength steel and new coated steel solutions.
d) How do steelmakers propose to tackle the above scenario when it comes upon them?
We are investing heavily to be able to provide these new steels to the market. It not only requires new dedicated production lines but also an upstream footprint to be able to produce high-quality steel. Consistency and reliability are key levers for this business. We are investing heavily in the Hazira plant, in Gujarat, to ensure that our industrial footprint expands, supported by the state-of-the-art automotive finishing lines.
We are leveraging the experience of ArcelorMittal and Nippon Steel which have been investing in the automotive segment for several years. This will result in specialized products for Indian customers. We are aware of market challenges being faced by customers, and our automotive steel solutions will address these issues.
e) What is the current scenario like in terms of automotive steel demand and offtake at AM/NS India as well as the industry? Was there a lull in demand in the pre-auto contact closure period?
Our OEM customers are announcing strong figures in terms of production forecast till the end of this calendar year. We are, therefore, expecting a positive trend. Structurally, demand in India is on an uptick. Demand for automobiles is still strong and the lead-time to get a car is long due to logistical constraints being faced by OEMs in terms of components.
There have been pockets of lower demand in some segments like two- or three-wheelers, but overall, we are optimistic about the automotive market for most of its segments.
Auto steel contracts are not linked to demand. There is an established method of price fixation that is based on an index formula that is available publicly.
f) Why did the just-closed auto contracts for Q1 and Q2 get delayed so much?
The steel industry was severely impacted by unprecedented cost increases resulting from the Russia-Ukraine conflict, which we were trying to (partly) recover from the market. However, these contracts have now been finalized.
g) What were the reasons for the Q2 increase in auto contracts? Was it mainly coking coal or were there other factors too?
The Q2 calendar year increase is linked to the evolution of the index. The index reflects the price trends which are impacted by the price of raw materials.
h) How does the industry expect automotive demand to be like in Q3 and Q4?
Based on OEM feedback, we foresee a good CYQ3 and strong CYQ4 activity. OEMs are looking to secure their supply chain to ensure that their suppliers can follow the fluctuation of production planning.
i) Coking coal prices have dropped over 50% since March. Are steelmakers likely to factor this in Q3 and Q4 contracts?
Steel prices are linked to many factors such as demand, balance in supply and demand, cost of raw materials, etc. If I see the current steel price index, I think the market has integrated all the reduction of the raw material costs. As mentioned earlier, contracts in the auto segments are linked to the various market indices.
j) In India, what is the automotive steel market like in terms of value/revenues? What growth does industry expect y-o-y by the end of the current fiscal?
The automotive market provides stability in volumes as it works with long-terms contracts. It also provides better revenues than commodity markets due to the various services and qualities we can provide to OEMs which proves to be a win-win approach. It means that when you promote steel solutions, you can also provide a cost reduction to the OEM. The important point is not the price of steel but the total cost as part of a function for the OEM. This is where we can share the value.
In terms of growth in the automotive segment, we expect to have the passenger and commercial vehicles market at 4.9 million units in 2022 calendar year and 5.1 million units for 2023 (market was at 4.1 million units in 2021).
k) To what extent are your automotive/steel exports hit because of the export tax?
We focus on the domestic market. Therefore, we are not a large exporter. About 80% of our total exports go to the Middle East due to proximity to Hazira, Gujarat. We do not export any automotive steel.
l) How is the Russia-Ukraine war impacting your automotive/steel business?
The Russia-Ukraine conflict, after a long Covid disruption, disrupted the steel business like several other industries. However, in general, India and the automotive business are not severely impacted by these events, unlike what we have seen in Europe.
m) Going forward, what is the outlook on Indian domestic pricing of HRC and CRC and why?
We are expecting healthy steel demand as India is poised to grow significantly. The volatility in prices will remain as long as the international situation and challenges continue.
n) How will global flat prices trend in the next three to six months? What factors can influence this trend?
We can anticipate three key trends. First, I do not expect a big negative impact on supply-demand balance. This means as long as export duties remain, Indian steel industry will have no other choice but to limit production like we have done recently.
Secondly, demand is not a focus or risk, we remain positive on this factor.
Thirdly, international context with reference to China remains an issue. This will drive the coming months and certainly the price evolution.
~By Madhumita Mookerji
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