Demand in the metal sector has weakened globally. Prices are treading downwards and companies are undertaking production cuts as they struggle to cut losses.
India is relatively better off than its global counterparts on the demand and margin front. While demand may have moderated from end-use sectors such as automobiles, capital goods and infrastructure, Indian players continue to remain profitable due to their low cost base.
In this scenario, companies in the sector are looking to optimise production by employing cost-cutting programmes to make their businesses sustainable. The hunt for mining acquisitions abroad has increased as state and central governments have imposed mining restrictions. Input and logistics costs have risen as companies procure raw materials through imports or from distant states. Companies are implementing operational improvement exercises, changing their product mix and increasing their reach to semi-urban or rural areas.
To improve productivity and acquire technical know-how to produce high-end steel, some steel producers have signed strategic alliances with their global counterparts.
Overall, there is an inherent optimism about the India growth story and it is expected that domestic consumption will be the key demand driver in the sector.
Leader, PwC India
Tel: +91 22 6669 1555