Talpesh Patel: India's new government will rescue the depressed CRC market

Asian Metal: Morning, Mr Patel, thanks for agreeing to the interview. Could you please give us a more detailed introduction to your business and products?

Talpesh: OK. We deal in steel flat products like HRC, CRC, GI and plate. In the past ten years, we have mainly focused on the steel trading business in our local market, as an agent of Essar Steel and India’s SAIL. We use Indian Standard IS513 as the specification of CRC, which is equal to SPCC, DC01 in China. In addition, we use Indian Standard IS2063 as the specification of HRC, which is the same as Q235 in China. We also want to enter the international market in the near future.

Asian Metal: As we know, the economy in India developed slowly in 2013, especially in the second half of the year. Do you think this has had an influence on the steel industry?

Talpesh: Of course. It has had an adverse effect on the steel industry. In 2013, the Indian Rupee devalued sharply and the economy was constantly in the doldrums. As a consequence, the government didn’t have enough money for infrastructure construction. A lack of electricity, low railway transport capacity and high loan interest rates were all factors contraining development of the steel industry. Most important of all, the demand for steel from downstream industries, such as the automobile industry, was quite weak, while the overall economy developed slowly. Most participants held wait-and-see attitudes concerning the future of the market and preferred to purchase materials according to their urgent needs. On the one hand, the depreciation of the Indian Rupee caused the price of imported raw materials to increase, so steel mills hiked their ex-works prices of flat steel again and again in 2013. However, customers were more and more reluctant to accept increased prices because of the weakening demand. On the other hand, the depreciation of the Indian Rupee caused the export business to develop rapidly, due to competitive prices on the international market. More and more traders began exploring overseas markets to release the heavy pressure on the business of trading in the local market.

Asian Metal: What about the CRC market in India now?

Talpesh: It is performing sluggishly at the moment. Because of the uncertainty due to political factors, some engineering projects have not been in operation during recent months. As a consequence, demand for CRC is quite slack right now. In April, the selling price of CRC decreased by INR500-750/t and the current price of IS513 1.0mm*1,250mm*C is INR45,000/t without taxes. Before the national election is held on May 12, commercial banks are reluctant to offer loans to steel customers because of the uncertain political situation. Most consumers do not have enough money and prefer to hold wait-and-see attitudes regarding the market outlook.

Asian Metal: How will the price of CRC change in Q2 in India?

Talpesh: I think the price of CRC will generally be on a flat trend in Q2. Demand from downstream industries shows no signs of releasing in the short term. I hope that the CRC market will perform more actively in Q3 and Q4.

Asian Metal: Do you think the national election will have an influence on the steel market?

Talpesh: Of course. It will have an important impact. Major industries prefer an NDA government. If a stable NDA government is formed, the economy will get a boost and new expansions will be explored with lots of investments happen ing, which will drive up the economy and steel demand.

Asian Metal: We hope the new government will save the quiet steel market. Mr. Patel, what are effective ways to run a steel business when the market is stagnant?

Talpesh: Right now the global economy is developing quite slowly, which is a backdrop we cannot change. As a steel trader, what I can do is change my business patterns, improve the quality of my steel products and my service, maintain my regular customers and explore new markets to find potential customers. However, in order to avoid risks, it is better for us to keep inventories running at a relatively low level and offer discounts to attract more buyers when the market is subdued. In Q4 of 2013, the steel market in India was quite bad, and it was hard to secure any deals at that time. In order to guarantee that we could reduce stocks, we offered a discount of INR500/t to customers who purchased more than 50t. Small profits but quick turnover is a better way to run a business while the market remains inactive.

Asian Metal: Mr. Patel, do you have plans to expand your business this year?

Talpesh: India is the fourth largest country producing steel products. During the financial year 2006-2007, it was a net exporting country for steel; meanwhile, during financial year 2007-2008, it turned to being a net importing country for steel as demand for steel products increased sharply. However, because of the economic slowdown in financial year 2013-2014, India only consumed 73.93 million tonnes of steel products, recording the lowest level in the past four years. It is predicted that India will still be a net exporting country for steel products over the next two years. For the time being, most steel mills in India are trying to explore the international market. We will attempt to scour our overseas markets in the near future, so that we can operate as both a local trading business and an international trading business in the coming year. We hope that Asian Metal can help us to expand our business.

Asian Metal: I hope Asian Metal can offer you support and bring you profits. Thanks again for accepting the interview and we wish your company a better future!