June 19 (LTIT) –The secondary steel producers in India seem to be hurt by the recent notification issued by the Steel Ministry. As per the new directive, local steelmakers are required to obtain quality certification from the Bureau of Indian Standards (BIS) for all steel products.

It must be noted that nearly 53 categories of steel products are mandated to obtain BIS certification for manufacture and sale. The notification makes it mandatory for local steel manufacturers to voluntarily obtain BIS quality certification for the remaining steel categories. The small steel manufacturers have raised concerns over the ministry decision.

The new notification is likely to impact secondary steel producers who rely on induction furnace route for steel production. The local feedstock to induction furnace contains high quantities of phosphorus, thus making it difficult to secure BIS certificates. The current technology used by these mills does not allow for any reduction in phosphorus content. Incidentally, India produces 30% of its steel through induction furnace route.

According to steel market participants, a switch to better technology will cost approximately INR 1,200-1,500 per tonne, which is quite unaffordable for smaller players who generally operate on thin profit margins, unlike large integrated steelmakers such as Tata Steel, JSW Steel, SAIL and RINL who use blast furnace route to produce steel.

The Indian Steel Ministry notification is likely to curtail domestic supply of steel products, which may lead to surge in prices. Also, the decision is likely to result in further market consolidation by integrated steel players.