Outokumpu Moves into India with Service Center

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Ferrous Metals

While other stainless steel mills like ArcelorMittal set up manufacturing operations in India to compete with domestic producers like Jindal and Shah Alloys the specialist Finnish stainless producer, Outokumpu has taken a different tack, at least in the short to medium term. Realizing the growing domestic market for stainless steel strips and coils is opening up opportunities at the top end for imported material the firm has been running two sales offices in India for sometime servicing bulk requirements that can accommodate the lead-time inevitably involved with imported material. Like their German competitor ThyssenKrupp Stainless, Outokumpu has been biding their time as the market has grown and matured. In the early days, price was everything in India and foreign suppliers were always going to struggle against domestic producers. But increasingly state consumers who can buy duty exempt and Indian component suppliers who sell to overseas buyers for whom quality is paramount are willing to pay a premium to buy from abroad.

Outokumpu was going to open a domestic Indian service center a year or more back but the threat of import tariffs made them postpone the decision according to this article. The company’s intention is to install cut to length and slitting facilities for local processing to end-users requirements but supply the service center with coil from Finland, leaving them exposed to anti dumping duties on the imported coils. But in a recent ruling, the Indian Commerce Ministry in its final recommendations on anti-dumping duty on steel products excluded imports of certain grades and sizes of stainless steel items from their list. So Outokumpu is now going ahead with a 50,000 ton per year service center in Maharashtra at a cost of over US$60m. Over 50% of India’s stainless consumption is on the western seaboard. Whether the Directorate General of Anti-Dumping and Allied Duties decision to review the duty structure and exempt stainless steel products below 600mm width and above 1,250mm was in anyway influenced by Outokumpu shelving plans to establish the service center is hard to tell but the company’s move is widely seen as an affirmation of the growing maturity of the Indian stainless steel market. Domestic stock-holding ventures in emerging markets are often little more than hardware stores and only very gradually develop into modern service centers as we would recognize them in the US. Others will likely follow Outokumpu’s lead in the next couple of years. Thyssen is an obvious candidate building on their exposure in China, Vietnam and Singapore. Considering their size, US distributors have been slow to expand stock-holding in Asia outside of China but with growth consistently over 6% since the middle of this decade, India is likely to receive a great deal more attention from foreign steel companies and distributors looking for a piece of the action.

–Stuart Burns

Comments (2)

  1. Päivi Lindqvist says:

    Late 2008 Outokumpu postponed the majority of its investment programme, including the service centre planned to be established in India. The Group is currently not considering to relaunch any expansion projects.
    Outokumpu Oyj, Päivi Lindqvist,
    Senior Vice President – Communications and Investor Relations

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