The norms can make vehicles heavier, making them fuel guzzlers and prone to wear and tear. But specialised steel can keep a check on the weight.
The Bharat Stage-VI or BS-VI emission norm for auto companies, to come into effect from April 2020, has opened up an opportunity for steelmakers, especially those that make highly specialised steel products.
It has added an element of competition in a segment that may be small in size but comes with better margins and has products that are premium.
In the fray are multinational companies such as Sweden's SSAB, Japan's JFE and Nippon-Sumitomo, and domestic players, Essar Steel and JSPL.
Lighter but stronger
BS-VI norms will make vehicles heavier, as auto manufacturers bring in changes to meet emission standards. For instance, tipper trucks will become heavier by three tons.
This will not just impact the fuel efficiency of the truck, but will also lead to higher wear and tear and lower loads too.
But it's possible to overcome these hurdles with specialised steel or to be more precise, with steel that has a strength of over 700 megapascals, or MPa in industry jargon.
The same tipper truck that meets BS-VI norms, if made with specialised steel, will not be heavier by three tons, but by 2.2 or 2.4 tons. Saving that much in weight is crucial, despite the higher cost of steel.
"This steel is expensive. But imagine, with the payload increase, lesser fuel use and lower wear and tear, the payback time is anywhere between six to 12 months," said Rastogi.
Most of the multinational manufacturers, including Volvo and Daimler, of heavy commercial vehicles, already use this specialised steel. Indian makers are also waking up to the advantages.
At present, 60,000 tons of this steel is sold in India every year, with the multinationals taking a larger share of 75 percent.
For SSAB, which has been making steel since 1878, the new emission norms are an opportunity to expand its presence in India. While it has been selling steel in India for 25 years, it first set up an office in 2009.
"We have two warehouses in India, near Chennai and Bengaluru. We are looking for one more, near Mumbai," said Rastogi.
Expansion in India will be important, as the country is among the fastest growing developing economies in the world. And more importantly, the local steel industry has been expanding much quicker than its international peers. In the specialised steel segment itself, the demand is growing by up to 10 percent.
The company is focusing on India, despite incurring a high logistics cost in shipping the steel from Sweden."The warehouses help, as now customers don't have to wait for 55 days, the average time taken to ship the product from Sweden to India. With the warehouses, it can reach a client anywhere in India in a week," said Rastogi.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.