BoJ rate hike may give galvanised steel cos here extra shine

MUMBAI: The interest rate hike by Bank of Japan (BoJ) might come as a blessing for Indian galvanised steel producers.

Post-hike, India’s exports in the biggest markets — US and Europe— might be preferably priced compared to its nearest competitor, Japan.

The BoJ had announced a 25 basis points increase in interest rate, sparking off speculations on the yen becoming dearer in the long-run. “This will have a positive ring for India’s galvanised steel producers.

We produce the high grade galvanised steel products, which till some time back was the Japanese forte.

These are used for high-end construction activities. The hike might well be the beginning of the situation tilting towards the Indian exports,” said an industry analyst. About 70% of the five million tonne of galvanised steel annually produced in the country is exported, mainly to the US, European and to a small extent, in the South East Asian markets.

“Though Japan exports almost 10 times more than India, even a marginal difference in a high-cost market will make a difference,” said the analyst. Interestingly, China is the biggest player in the low grade galvanised steel. But some of the industry players have their own reservations.

“The finance component in the total cost is negligible in Japan. Moreover, India supplies only 3% of the total global requirement. The rate hike will hardly make a difference,” industry sources said. Ankit Miglani, director, Uttam Galva Steels, said: “More than the rate of the hike, this is more about a policy change.

Earlier, the yen was not allowed to strengthen. Now the hike will affect the liquidity in the market. This will make exports from Japan less viable in the long run.” Other than the OP Jindal Group, Uttam Galva, Tata Steel and Essar Steel are among the major producers of galvanised steel in the country. Jindals and Uttam Galva are the main exporters.

Recent investments in technology have enabled the local producers to compete with Japanese and Korean products.

Players like Uttam Galva are already in the middle of capacity expansions. The latest development, coming after the spurt in prices of steel, brings more happy news for the players.