Products In Prime Focus In Raw Material Industry
Ideally, start-ups take a long time figuring out their `Product-Market Fit' (PMF). Fortunately, we realized a huge gap in the industry and started working towards a B2B aggregator platform, specifically dealing with metal and allied solutions to MSMEs. Dhatu Online Solutions exciting and challenging first milestone was the development of a working prototype with good IT infrastructure and data security, which we achieved within six months. Since it's a big platform with its exclusive processes, which we offer to buyers and sellers, we had many sleepless nights, but in the end, everything was worth it.Our next target was to find the first few customers and achieve the PMF. Today, we can proudly say that we have over 4000 active users, along with 1500 buyers and 2500 sellers on the platform.
We started our company with tech development from the Bengaluru office. However, our research indicated that nearly 40 percent of all iron and steel trade/raw materials are supplied all over India from NCR. We opened our first office in Delhi, NCR, in October 2020, and there has been no looking back. We now look forward to expanding our operations to Mumbai, Pune, Chennai and Bengaluru.
First, the metal industry has been very region-specific, and we are now breaking the geographical barriers, thereby enabling access to cheaper raw materials for a multitude of businesses. As we expand into newer regions, the supplier base will only keep growing, and the buyers will benefit in the long run. The MSMEs, which depended on large `traders'- will now be able to procure directly from the `Raw Material Micro Industries.' It will very soon see a great shift in this segment.
Second, there is a lack of access to financing options due to a lack of knowledge. One of our verticals is primarily focussing on supply chain finance, where our channel partners take care of the buyer's supply chain finance needs, leaving them with more time to focus on their core business needs instead of supply chain costs. It will help bridge the gap in working capital, which banks are not financing these players. Banks are primarily focused on medium and large industries, but in the case of small- and micro-level, people are not very aware of financial opportunities.
Our platform aims to be the backbone of the MSME sector and raw material industry. It will provide numerous opportunities to buyers (providing them with multiple vendor listings) and sellers (access to several buyers, which wasn't possible in the past.)
Effects Of Escalating Cost Of Raw Materials
Escalating cost is a major factor that affects this industry from time to time. However, as an aggregator with a zero-inventory model, we are not affected directly. Despite a drop in demand during the lockdown, prices are on the upswing, particularly with steel, oil and other raw materials. Here, Dhatu Online plays a major role as we help plan purchases efficiently with less overall lead time, which was not possible in the past. We have a portfolio of satisfied buyers who confirm that they can plan purchases better with the help of the technology offered by Dhatu Online.
Challenges In The Raw Material Industry
The raw material industry is the backbone of the metals manufacturing sector. It faces numerous challenges like high investment cost, shortage of quality coke, fluctuating demand, lack of technical knowledge, dependency on the government, outdated technology, etc.
As the major raw material is steel, we will focus on steel industries here. Since these industries require high investment, government policy is also a major factor in developing these industries. Also, one of the major steel suppliers is a public sector unit, which may not be able to deliver a product with efficiency, resulting in a high cost of production. The industry faces heavy competition from China, Korea and Russia, but we cannot spend much money on R&D. One of the challenges that raw material industries face is the lack of availability of quality input material as we have to depend on other countries.
For example, we have to import quality coke from Australia to run the blast furnace. If we try to resolve these issues, we can play a major role in raw material industries worldwide because the per capita consumption of steel is still very low compared to other nations; for example, the per capita consumption of steel in India is 70 kg. However, in the US, it is 230 kg.
In the raw material industry, the focus is generally on steel, aluminium and copper. Because of increasing demand from infrastructure, the focus shifts to steel as it is being primarily used in all industries as the input raw material. After metal, we need allied solutions in consumables.
Scope Of The Industry In The Future
This industry has just started evolving in India, and it has scope because of the huge population. We are the second-largest steel producer with more than 110 MT (million tonnes) during the previous year. The government of India has a plan for steel industries with the target of increasing the production to 200 MT (million tonnes ) by 2030. to raise the steel consumption in rural India from the existing 19.6 kg /capita to 38 kg/capita.
The government is trying to uplift the living standards for everyone, and infrastructure is also being developed quickly. Both require a lot of steel consumption. Right now, we are at 70 kg per capita steel consumption. However, developed countries like the USA are at 230 kg per capita. So, we can see increasing demand with this decade.
Major steel manufacturers are planning to set up a new plant or are increasing their installed capacity, for example, Tata Steel has planned to invest around Rs. 60000 crore during the next three years. POSCO has announced the setting up of an integrated steel plant in Odisha with an investment of $12 billion, which would be the largest FDI. Arcelor Mittal is planning to invest Rs. 50,000 crore in Odisha. JSW is expanding Vijayanagar Plant by 5MT every year and SAIL has announced the doubling of the production of its five major steel plants.
As per Indian Steel Association (ISA), steel demand will grow by 7.2 percent in 2019-20 and 2020-21.
The demand for steel is growing by more than seven percent every year, and there is scope for growth due to India's comparatively low per capita steel consumption. With the government initiative under the different schemes and the world's attention on India as an investment hub, the per capita steel consumption is expected to rise due to increased infrastructure, construction and the thriving automobile and railways sectors.