SAIL prioritises capacity expansion, raw material security for FY25

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The Steel Authority of India (SAIL) is gearing up for a transformative year in FY25, with a strategic focus on expanding capacity and securing raw material resources to solidify its position in the steel industry, the company said in its FY24 annual report. The company flagged that it will look into blending domestic coal for operations to reduce reliance on imports and protect its bottom-line from supply chain shocks.

As the infrastructure-led domestic demand remains robust, SAIL is looking to expand the crude steel production capacity from the existing 19.10 million tonnes per annum (MTPA) to 35.65 MTPA by the year 2031. "At SAIL, we are on track to excel in two focus areas: to maximise capacity utilisation and to provide the best
value to our customers in order to safeguard against the vagaries of market fluctuations," chairman Amarendu Prakash said in a note to shareholders.  The comments come as the domestic steel prices plunged over a three-year low weighed down by rising inventories and globally weak prices.

The outlook for the Indian steel market remains challenging in the short term, with continued downward pressure on prices likely, analytics firm BigMint wrote in its note published on September 2.

Prakash highlighted that business at SAIL was impacted by "several macro-economic challenges like upcoming new capacities, trade measure initiatives, inflationary pressures, supply chain disruptions, interest rate hikes by central banks, and moderating demand in China resulting in pressure on pricing and excess availability of steel products."

For FY 2023-24, SAIL's turnover stood at  Rs  1 lakh crore for the third consecutive year. With a sales turnover of Rs 1.05 lakh crore during FY’24, which was 1 percent higher than the previous year.  Amid the volatility of raw material prices, the company is now looking for "strategic interventions in securing raw materials, improving the quality of inputs, reducing business risks over the long term in resource mobilization."

Coking coal is a key raw material that is used in the manufacture of steel and any movement in its prices impacts the price of steel. Indian companies including SAIL are dependent on countries like Australia and Russia to import coking coal. Last year, SAIL flagged that the company is looking to increase coking coal purchases from Russia due to cheaper prices.

However, to reduce dependence on imports, SAIL is working towards incorporating a blended coal mix, with a higher proportion of indigenous coal. This shift aims to reduce the company's dependence on imported coking coal, ultimately helping to curb the outflow of valuable foreign currency while enhancing domestic resource utilization, according to the annual report.