Steel service centres pave the way for complete solutions

This has paved the way for stringent quality requirements, tight delivery commitments, and expectations of a professional service from this sector and has led to emergence of the organized Steel Service Center (SSC) market in India. Prior to 1993, the SSC market in India was highly fragmented and unorganized. In 1993, the first service center was setup in the organized sector by Mahindra Group in partnership with Mitsubishi Corporation and Nissho Iwai Corporation.

SSC is basically a "value"-adding intermediary, a connection point between steel producers and final manufacturers by providing supply chain management, procurement services, technical services, stocking, processing, and just-in-time (JIT) services. The main role of a SSC is to perform processing requests on steel products as per manufacturers' specifications and supply the product in the exact dimensions, form, and quantity demanded.

The SSC market is expected to grow at a compound annual growth rate (CAGR) of 18 percent during FY 2017-18. As steel makers expand capacities and more and more customers opt for customized products, the Indian steel market is making a steady shift toward selling steel solutions instead of simply selling steel.

Exhibits 1 and 2 demonstrate the SSC market linkages and services offered, respectively.

Exhibit 1: SSC – Market Linkages

Exhibit 2: SSC –Services offered

Demand for SSC is independent from demand for steel. The customer has an option to procure material from steel manufacturers, steel distributors, or SSCs. Steel consumers prefer procuring material from SSCs than distributors or steel manufacturers because of following reasons: shorter lead time, smaller batches, growing preference for SSC, logistics cost, product range, and quality certifications.

In developed European countries, the SSC concept is well developed with advanced facilities such as computer-aided design/computer-aided manufacturing (CAD/CAM), laser cutting with extremely high precision and accuracy resulting in high yield and finest quality of output. Frost & Sullivan estimated that approximately 300,000 firms buy a large portion of their metal requirements from SSC across the globe.

The SSC concept however, is relatively new to India. According to Frost & Sullivan SSCs operating currently in India cover only about 15 percent of the total Indian flat steel production, which was about 5.75 million MT in FY 2012-13. This is very low as compared to other countries where service centers account for approximately 60-70 percent. It is estimated that SSCs will process around 25-30 percent of Indian flat steel output (around 13.26 million MT in FY 2017-18).

With growing competition in the Indian automotive industry, white goods, fabricators and other end-use segments (infrastructure, construction, electrical, pipes and tubes, and engineering equipment-related industries), and the need of reducing inventory cost, implementing JIT is likely to become mandatory – this trend is expected to aid the service center concept to grow rapidly in theAdidas Fotballsko