| Location, location, location | Date: 10/3/2010 |
No question location is the key to any business. It could be a main street, or outskirt of a town or a confluence of roads, rivers or for that matter a port. It can also of course evolve with time.When I was a kid growing up, it was Taloja biryani on the way to Poona (sorry Pune). The NH4 highway put an end to it and just as the expressway has done to many other businesses along the NH4 highway.
Likewise Hong Kong was for for business to China before the mainland Chinese became more enterprising and the country itself opened up.
But there are some locations that at first glance look certainly more permanent. At the confluence of East and West, stands Turkey straddling both Asia and Europe with access to markets in North Africa, CIS and Middle East. Maybe its infatuation with Europe and accession to EU has not allowed it to develop its location more strategically. But its loss has perhaps been the gain of Dubai at least until its own infatuation with real estate and building castles in the sand.
But to its credit, its Freezones do attract businesses from Asia and Europe making it a major transit port. And of course its own airline became its crowing glory connecting countries even in the Far East to the Americas and taking a large chunk of traffic from the domestic airlines of various countries.
Of course location is fluid. It will be interesting what the future beholds. Who would have thought of the steel industry shifting to the East. Or the rise of the BRIC nations. Or that what happens in Beijing and New Delhi will soon perhaps be more important than in Washington and London.
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| Steel Recovery: Does it have legs? | Date: 31/8/2009 |
It is now one year since the Great Crash in steel prices. We have all done our reflections and introspections. Question however remains if we have learned our lessons. The answer to us is NO. Yes the multiple Government stimulus packages have worked to save the economies; "Cash for clunker" have revived auto steel sales. But to us these are temporary measures to save the economies from total collapse and the Governments will soon run out of ammunition for repeated interventions. And it is only real demand not steroid driven demand that can revive steel consumption.
Unfortunately irrational exuberance is creeping back (did it ever go away). Steel mills are raising prices left, right and centre while service centers and end users are only cautiously restocking their inventories with staggered purchases. Capacities are also coming back online! Will the resulting overcapacity sustain the discipline the mills had in controlling supplies? Does the exuberance have legs or are we going to go through another price correction (to put it mildly) that will once again bring back the headaches of high priced inventories.
The wreckage of the price crash still remains and we are already prematurely celebrating. Are we kidding ourselves into another bubble? The worst may be over but any revival which is not gradual and sustained will result in yet another crash...the dreaded "W" shaped recovery!. Already HR prices are now under pressure in China. Is it a temporary blimp or will it infect the rest of the world? It is undeniable that global steel trade has fallen in last one year and recovery is very marginal and customers are relying on prudent purchases from domestic mills. So where will the capacities coming back online go? Will we see global price wars and discounting to move inventories which will inevitably build up.
There are just too many questions. While we are cautiously optimistic because the global economic recession seems to be have found the bottom, we also remain cautious and skeptical about the myopic exuberance. It seems misplaced and could once again come to haunt us. We admit our crystal ball is not clear. So it would be prudent to be cautious on the foggy road ahead of us and make sure the entire supply chain recovers in tandem.
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| The Hidden Ingredient In China's Success In Manufacturing | Date: 7/12/2009 |
Much can be said about China being the factory of the world. Make no mistake, however, that it is also on its way to becoming a technology and an innovation leader. The ecosystem is there and there is a discipline in its method.
Several things could astonish one about the factories in China. It could be the organization at the floor level at even mid-sized factories or they being spotlessly clean or their innovative loading and unloading facilities or their simple yet effective solution to problems.
But to me the most astonishing is the camaraderie the bosses and the workers enjoy.
Cigarettes along with warm handshakes are exchanged yes even with the workers.And this seems ingrained rather than feigned or practiced. This camaraderie to me is their secret ingredient of their success in manufacturing. I don't seem to feel the envy of the workers towards the bosses and their BMWs (incidentally Chinese love cars). If you are at lunch time, you can often see food trolleys moving across the shop floor with warm rice and vegetables.....may not be a fancy lunch but it is definitely nutritious and filling.
Also don't be surprised if your driver joins you when the managers take you for lunch to a restaurant. Or join you for a game of ping pong and even demolish the boss with some sizzling smashes.
Maybe we in India lack this camaraderie (you can call it teamwork in manager speak) and are burdened by our legacy of class and caste. Maybe our managers need to walk the factory floors more and build a sense of camaraderie down the line instead of filling newspapers with their strategies and talk. And the CEOs need to spend a little less time glued to the computer screens following the sensex and more time with the ears and feet on the ground.
We cannot remain a country with islands of excellence in a sea of mediocrity. We have to pull together and develop a shared vision right down to the floor level. We have to pay attention to details because opening containers from India at a factory in China can be a gut wrenching experience. The worst packing and loading will invariably be from India
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| BIS Certification --- Update | Date: 19/2/2009 |
The Indian authorities have taken a measured and thoughtful approach. They have worked with the steel community in understanding the industry and the implications of BIS standards
Lets hope Foreign manufacturers' international standards (Japanese, EU, Korean standards are also extremely stringent and accepted globally) are accepted in lieu of BIS standards. The application process is simplified and the cost scaled down considerably. For the sake of the industry as whole a level playing field must be maintained and the steel user industry must get competitive prices and specifications/steel unavailable in India..
Beggar-thy-neighbour policy is a policy that will doom the entire domestic economy and the authorities must continue working with steel community because this global financial crisis will continue for sometime and perhaps worsen before the global economies stabilise and grow again. A misstep or a knee-jerk reaction will harm the industry creating closures, unemployment and social unrest.
This is a going to be a test for the Steel Industry and for Governments to be sensible despite increasing pressures it will face from sections of the industry.
A recap of the BIS is as follows:
I) In Effect from 12 Feb 2009
a) 1785 (Part - I) : Plain Hard-drawn Steel Wire for Pre-stressed Concrete - Part I : Cold Drawn Stress-relieved Wire
b) 1785 (Part - II) : Plain hard-drawn steel wire for Pre-stressed concrete: Part 2 As drawn wire
c) 6003 : Indented wire for Pre-stressed concrete
d) 6006 : Uncoated stress relieved strand for Pre-stressed concrete (First Revision)
e) 13620 : Fusion boned epoxy coated reinforcing bars
f) 14268 : Uncoated stress relieved low relaxation seven ply strand for Pre-stressed concrete
II) Postponed to 12th Feb 2010
a) 277 : Galvanized Steel Sheets (Plain and Corrugated)
b) 648 : Non-oriented electrical steel sheets and strips for magnetic circuits
c) 2002 : Non-oriented electrical steel sheets and strips for magnetic circuits
d) 2041 : Steel Plates for Pressure Vessels Used at Moderate and Low Temperature
e) 2830 : Carbon steel cast billet ingots,billets,blooms and slabs for re-rolling into steel for general structural purposes
f) 2831 : Carbon Steel Cast Billet Ingots, Billets, Blooms and Slabs For Re-rolling into Low Tensile Structural Steel
g) 3024 : Grain Oriented Electrical Steel Sheet and Strip
h) 15391 : Cold Rolled Non-Oriented Electrical Steel Sheet and Strip - Semi-Processed Type
III) Omitted
a) 1786 : High strength deformed steel bars and wires for concrete reinforcement.
b) 1993 : Single cold reduced tinplate and single cold reduced blackplate - electrolytic and hot dipped tinplate sheet and blackplate sheet
c) 2062 : Steel for General Structural Purposes
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| Steel Exchanges | Date: 17/2/2009 |
A promised potential that has never quite taken off. In 2000 it seemed steel would turn virtual but the dot com bust made a reality check. Since then there have been several efforts to revive some of these ideas and a few with a possible success.
We have not been able to take a firm position. It sure sounds doable and great on paper and even when programmed. It may have benefits to even out the volatility in steel. It may make steel trading more efficient.
The downside seems as negative and daunting.
There is a reluctance on the part of Steel Mills to use the steel exchange and to outsource their years of insight to another entity. There is concern about governance and neutrality of the steel exchanges and buy-in from the community at large. And how deep do you eliminate intermediaries. Some maybe actually adding value to the steel. Others through financing and the justification could go on. And when the market turns negative where do you transfer your pain (it could be called "share" when there is an existing relationship).
Steel itself is complex. It may be possible to have bench mark price for commercial grade Hot Rolled coils but what about other grades, the quantity, the financing and despite the strides made in quality, there is always a little premium on past relationships, quality controls at the mills and just the unquantifiable psychological peace of mind.
Sure education and seminars are being undertaken by steel exchanges. And some steel in some places is moving on to the steel exchanges.The technology is there and it keeps improving. It will probably be the commercial grades and the commodity items like billets and Hot Rolled. But there will be reluctance on the part of the mills and buyers to move higher grades and value added products to steel exchanges.
There is increasing cross collaboration between the steel maker and steel user and this can only happen on the shop floor or with intensive technical discussions and experiments. Neither would like to vaporize this synergy and knowledge bank that develops.
There is also the hindsight of the fiasco in the banking industry where technology took away the human insight into customers. Esoteric financial tools can transfer liabilities from one entity to another until it comes back to haunt the entire industry. Investment Funds can create froth, fictional prices and bubbles and subsequent panic which can put the savings of entire communities at risk and leave the steel industry gutted. And a bit of correction or cyclity which the steel exchanges try to iron out may actually help prevent the deep "V"s that can destroy an industry for years.
It will probably be nice to comment on this every year or two. There will be debates within the industry. At our end we are impressed with some of the trends but continue having our share of concerns. We of course keep ourselves clued in.
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| BIS Certification | Date: 31/12/2008 |
It's Here .....BIS Certification For Steel In India
This is a topic that one can call glocal. Today it is India, tomorrow it could be anywhere else in the world. And it does have implications for steel exporters across the globe.
Is the legislation "Stealth protectionism" or is it an "Enlightened legislation"? The answer is not simple. In all fairness the legislation needs to be studied in depth and passing simplistic judgements will not help.
Firstly it was to have come into effect in 2007, there were extensions and finally now it will come into effect from February 12. If you have been caught napping, you cannot really blame anyone....the notification has been online at bis.org.in for quite some time and the authorities have done their duty.
It may hurt us in the short term but greater professionalism is the need of the hour within the steel industry and we need to ensure quality steel is utilized by the industry.
Unfortunately the legislation has several ambiguities which will result in delays in import clearance, selective interpretation by authorities and dealers/importers and a atmosphere of uncertainty.
The cost of getting BIS certification for a foreign manufacturer is exorbitant This certainly needs to be revised. Domestic or international standards being followed by the foreign manufacturers should be recognized by the BIS authorities. Payment for visit of inspectors from India may not be viable for manufacturers and it would add to the cost of doing business in India. The period of certification is also very short.
The legislation also does not spell out the documents that need to be maintained for certification. It just mentions that the authorities will need access to documents and records.
According to us, instead of opposing the legislation, the steel community should work with the authorities to seek clarity, fairness and smooth implementation.
Our suggestions would be:
- a six month transition period be granted.
- Manufacturers' ISO certificates, test certificates be accepted for grant of BIS certification
- Allow tests to be carried out domestically to ensure the product meets BIS Standards
- laboratories be appointed near the major ports and ICDs by the authorities
- the legislation along with the clarifications, laboratories be widely advertised in newspapers.
The authorities should also understand that many steel specs are not produced in India and there is a huge steel using industry as well that needs to be heard.
Finally, the domestic steel manufacturing industry should also follow the BIS requirements in letter and spirit.
Are we asking for too much? Next few months will be interesting as the steel community grapples with this issue and comes to term with this legislation.
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| A Time To Reflect | Date: 27/12/2008 |
What better time to start a steel blog than the year ending 2008. A year that saw historical highs in steel prices followed by gut-wrenching drop in prices as the financial crisis infected the globe and demand died on us.
This is indeed a time for reflection....to take a deep breath. Normal adjectives cannot describe the year in the steel industry. 2008 started with price rises across the globe as the mills worked in the astounding increased price of raw materials. April/May 2008 reached the zenith in prices as we hit historical highs never seen in our times (and we have been around for some time). July was a pause and what followed was a drop off the cliff....without parachutes.
Probably finding answers will be difficult and it will only be hindsight until we forget and have a next time. However along with the rest of the world it was one common affliction that affects mankind..."greed"
Iron Ore saw price increases of over 65%, oil hit almost USD 150/- a gallon, coke and all minerals and metals reached astronomical highs. Sure demand was growing in emerging markets but price increases were irrational...squeeze the customer to his limits.
The mills in turn renegotiated contracts and added surcharges and everything boiled over. Where was our common sense! At that very time U.S. housing crisis was unfolding but we believed we were decoupled and the world had several engines. We refused to believe in an interconnected world while the industry had itself become interconnected and global.
Come August 2008 and we received one jolt after another. Housing crisis turned into a global banking crisis. Liquidity died on us. Real estate and infrastructure projects came to a grinding halt. Auto industries began curtailing production. What started as a seemingly benign price correction turned into a price crash. High priced inventory, falling demand, contracting bank credit burnt global traders, mills, service centers and within no time the booming first half 2008 turned into a graveyard of failed hopes, goals and disputes.
Fortunately the industry has shown discipline as production cuts have come across the globe. Inventories are running down, financial stimulus should be working through the global financial system however 2009 will be a year of rebuilding trust and reassessing strategies.
But we need to be careful. Irrational exuberance is being replaced with irrational timidity and anti-dumping mechanisms are rearing their heads which may make a bad situation worse as domestic produces wield their political leverage to curtail imports and set back an industry that was truly turning from a rust belt industry to a 21st century global, well-oiled industry.
We need to keep our hopes in place and our fears in check. And meet the challenges courageously as they unfold. No doubt 2009 will be a year for pause and contraction
To speculate on prices is going to be a hazard. Experts have gone from one extreme to another. We have to accept that we are a part of the larger global economy and we cannot talk up the prices. Until the financial system finds its bearings the steel prices will find it difficult getting traction. There will of course be periods of restocking and price movements due to simple demand and supply mismatches.
However we need be honest with one another and work fairly as trust worthy reliable partners with of course a reasonable profit. The steel industry and steel using industry has never had a high level of trust. Maybe it is finally time we changed and moved beyond talk. If anything it will save us from a future bust if we truly believed in interdependence.
The growth in steel will eventually return. There are massive swathes of land in Asia and Africa that will develop and people's aspirations in these developing economies will follow.
So lets be positive and ring in the new year. Happy New Year to everyone. If you have a comment, suggestion or topic you would like us to cover please email at daanish@worldofsteel.com We would love to hear from you.
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