See pressure on Q4 vols due to China imports: Kalyani Steel

Nigel: Could you tell us with regard to your topline, it has come absolutely flat. Was there a dip on volumes or was there a dip on realizations?

A: There is a dip on volume and largely because of very heavy imports from China. In fact we are wondering how the next quarter will be because the imports from China has multiplied and this is affecting our volumes substantially.

Reema: Can you give us the number, how much did your volumes degrow in Q3?

A: Our volumes had gone down by almost 3-4 percent in Q3 as compared to Q2. However, we are fearing the volumes will have a much larger impact in Q4 as major part of imports have started coming from China in Q3 and it continues now and it is increasing everyday.

Nigel: Steel prices have also been under pressure so any kind of hit on that front or on sequential basis were prices stable on a year-on-year (YoY) basis, were they higher?

A: Steel prices are under tremendous pressure as you have rightly said and it is basically because 1) heavy imports from China and 2) weak demand particularly in auto sector.

Reema: Despite the volumes being under pressure as well as realizations you have managed to improve your margins. What aided this margin improvement and what is the outlook on the margins going ahead?

A: We are able to maintain our margins since last couple of years basically because of very heavy focus on cost reduction. Some of the benefits of various projects which we had taken up are still coming. So, we will be able to maintain the margins because of the cost reduction but then there is a limit to it so going forward it doesn’t look that we will be able to maintain if we are forced to reduce the prices any further.

Nigel: What about the iron ore availability, is it good enough for you’ll and are you’ll getting your iron ore at good prices? Also take us through the last e-auction, how was it, when was it, did you pick up any kind of quantity from there?

A: We are picking up almost in every e-auction some quantity or other. Recently NMDC did announce some minor reduction in prices of iron ore but then the way international prices of iron ore has reduced, in India there is hardly any reduction. Today whatever advantage we used to have in India because of cheaper iron ore as compared to global prices that has vanished. In fact that is another reason why imports are coming up so much because we are no more cost competitive.

Reema: Do you think that you will have to cut prices in Q4 or in the near term given all these factors about imports from China as well as the pressure that you have seen?

A: We are waiting for the growth oriented Budget and it all depends what all are the announcements in the Budget and how the sentiment is after the Budget. If there is a very positive sentiment in the Budget, there are some good investment plans announced in the Budget and good incentives for new projects to come up I am sure this pressure which we have today will ease out. At the same time we are expecting some measures by the government against this dumping in India.

Nigel: How higher do you think that they should increase this import duty with regard to steel and your nine month performance is almost better than what you did in the entire of last year so give us some guidance with regards to the Q4?

A: As far as the Budget part is concerned, we are very hopeful that there will be increase in import duty on steel and particularly alloy steel. As far as the last nine months are concerned, it is all because of the type of efforts which we have put in. As I repeatedly keep on saying, very heavy focus on cost as well as continued innovation has helped us. Going forward it may look difficult because we have implemented many of the things which we initiated.