by Arusha Das
March 17, 2010: Upbeat on the Indian steel market outlook, the South Korean steel major, Posco, will soon start the Chennai processing unit by mid 2010.
The company has also recently ramped up its Pune processing unit. As the country is slowly moving towards customisation of products, Posco is the only international name in the domestic regime to have ventured into the steel service centre (SSC) segment.
Posco's new SSC at Chennai is under construction. The centre is targeting to sell to the new Nissan-Renault assembly plant near Chennai, a company official told Steel Insights.
To be named Posco India Chennai Steel Processing Centre and wholly owned by Posco, the plant will have a capacity of 1.2 lakh tons per year (ltpy) and will primarily cater to the requirements of the auto and auto parts makers. As per recent market reports, the total investment in the plant is estimated at KRW 4.6 billion ($3.65 million).
The company has also recently commissioned a second coil centre in Pune. The 1.2-ltpy centre is managed by Posco-India Pune Steel Processing Centre (Posco-IPPC). The facility came up with one slitting line and one blanking line. Posco-IPPC was set up in 2006 with a 1.3-ltpy processor with two slitting line and two sharing line.
Out of this total 2.5 lakh tons of installed capacity, the Pune unit is likely to process only around 1 lakh tons of steel in the current fiscal. This under-utilisation of the facility was primarily a recessionary effect. Moreover, the second unit of the facility came up only in April 2009, and thus the company expects a better utilisation in the upcoming fiscal. Posco-IPPC is optimistic about reaching its target of 2 lakh tons in the upcoming fiscal. Some of the major customers of this unit is General Motors (GM) and the joint ventures of GM.
It was later next year, in order to further extend its reach in the domestic market, that in December 2007, Posco started the Posco-Delhi Processing Centre (IDPC) near New Delhi, a 1.2-ltpy unit. IDPC also processes both electrical and automotive grade steel. However, owing to the economic meltdown, the capacity utilisation remained low and the unit produced around 90,000 tons in fiscal 2009-10. As the end user segment is witnessing positive growth, the unit intends to take its capacity utilisation to 100 percent in the upcoming fiscal.
IDPC at present processes CRPO while IPPC processes CRGO and CRNO for the electrical segment and CR, galvanised and high strength steel for the auto sector.
However, IDPC is not planning an immediate capacity expansion. Rather it is more inclined towards increasing its market share. Some of the major customers of this unit is Maruti and the joint ventures of Maruti.
The objective behind setting up this unit was to capture the smaller manufacturers. Besides, the logistics being one of the major issues in the country, the company opted for this location to cater to the north Indian consumers.
Prior to that in June 1998, Posco established POS-Hyundai Steel Manufacturing with Hyundai Motor, also in Chennai. Raw material feeds for the centres is sourced from Posco, as per the company officials.
Thus, it is understood that the company has strategically come up with the processing units at the auto hubs of the country. Though the IDPC and IPPC process both electrical steel as well as auto grade steel, the major impetus is on the auto sector.
Being the only international player in the domestic front, the company has certain scoring points over its Indian counterparts. One of the key areas is the wider material. Currently, the Indian manufacturers produce coated or CR material up to 16x50 mm, which is used in the auto sector. But Posco provides the market with material of higher width that is up to 18x50 mm. Moreover, the CRGO is not manufactured in the country which once again gives an edge to Posco over the Indian manufacturers. Posco also produces better auto skin panel material than its Indian counterparts, as per industry sources.
However, the company is still unable to reach the lower grade segment of steel as the quality is not stringent in this segment. Thus, being a better quality producer, the prices are generally not competitive in this segment.
Nevertheless, bullish on the Indian market growth in the steel sector and optimistic outlook of the automotive sector, Posco has big plans for the country. "The company has big plans for India. The company feels that India is likely to be the biggest market of steel," the official added.
In addition to the steel mills in Orissa, Karnataka and an upcoming galvanising line, Posco intends to venture into the electrical segment in a larger way through lamination lines, with the help of its SSCs.
With high grade quality and service, just-in-time deliveries with presence in diverse location, the company is all set to increase its footprint in the country. By increasing its market share and present capacity utilisation of 90 percent in its IDPC unit, the company intends to come up with new products for the auto segment.
Source: Steel Insights