India’s automobile sector may be at its lowest-ever phase, but steel company JSW Steel Limited (NS:JSTL), betting on future growth, has set up a state-of-the-art Cold Roll Mill (CRM-2) here to manufacture high-grade auto steel. This would be the first Indian steel mill to manufacture outer body panels for passenger cars and SUVs.
The 2.3 million-ton auto-grade steel manufacturing plant will benefit automobile manufacturers and buyers as the production cost of cars, SUVs, motorcycles and even home appliances by about 15 percent of current costs, simply because of savings on freight, foreign currency exchange and other expenses that everyday Indians currently have to pay extra for. A report in The Times of India quoted Vinod Nowal, deputy managing director of JSW, as saying the reduction in production cost would also provide a major relief to the domestic automotive industry, which is reeling under negative sales growth.
For now, though, automobiles are not exactly hot commodities in India, so it’s a moot question whether the savings from this new mill, even if passed on to the consumer by the auto companies, would entice more purchasing. JSW Steel is clearly betting on the future, and also hoping that India will soon become a global hub for automobiles because the demand for high-end steel would grow exponentially. The new plant comes equipped with the latest technology to produce continuously annealed cold rolled coils (up to a strength level of 980 megapascal) which was previously imported from other countries.
According to Nowal, Japanese car manufacturers Nissan and Honda had shown interest in manufacturing their SUVs in India. JSW Steel had collaborated with Japanese steel major JFE for setting up CRM-2. JFE has a 15 percent stake in JSW.
Admittedly, Indian automakers do import about 20 percent of their high-quality steel from China and other nations to make up the 4 million tons of auto-grade steel used for making outer body panels in India. With the new mill, JSW hopes to meet at least 15 percent of the demand of automobile industry for high-end products including dual-phase and strip steel.
Cheap imports have, indeed, become a problem for Indian steel mills. A recent report by ratings agency Crisil said China had more than tripled its share of Indian automobile parts imports to 21 percent in 2012 from 2006, meaning Indian automakers are increasingly preferring cheaper imports as compared to quality domestic products.
by Sohrab Darabshaw