Q When do you expect a recovery in the sector?

A: Steel prices have softened considerably over the last three months mainly because of the global financial turmoil and have reached unsustainable levels. However, we expect demand to pick up from the first quarter of the next fiscal because of two reasons. First, the inventory pile-up at the consumers' end will get liquidated and we expect fresh steel buying to start by then. Second, governments worldwide have taken various fiscal measures to boost liquidity, which is expected to result in increased spending on large infrastructure projects. This will also lead to increased demand for steel.

Q: Will further consolida¬tion minimise the impact of the downturn?

A: The industry is still fragment¬ed. Even the largest producer has a capacity that is about 10 per cent of the global capacity. Hence, there is a greater need for consolidation in the industry which would provide a quicker response to the sort of situation that we are witnessing today.

Q: What measures has the group taken at its overseas plants to counter the slackening demand?

A: The Essar group has taken many initiatives for a significant cost reduction, both on fixed and variable costs. On the operations front, it has undertaken measures to exploit the capabilities in the plant to produce value added products for niches, even if it may have resulted in a reduction in volumes.

Q: Is Essar Steel's expansion plan in India on track?

A: We are doubling the steel capacity from 4.6 million tonnes to 9 million tonnes at Hazira. We are also setting up a 5-metre plate mill and a pipe mill. We expect that 25-30 per cent of the steel we produce will be consumed by downstream businesses. We are looking at various distribution channels to penetrate consumption points to boost our sales volume.

Q: Could you give us an idea of your customer mix?

A: Essar caters to a wide segment of industries that include infrastructure, engineering, pipe making, and power among others. Essar has pioneered steel retailing concept in India and has about 100 retail outlets across the country. We target to achieve 25 per cent of total sales from this segment.