- To some extent I agree that Indian steel demand is greater than Japan and will outpace it easily. The core problem is that any company can enter into this sector and cause competitive margin erosion. I disagree with the company’s claim that there’s little to no competition – see Ofbusiness, Infra.market, Shankara, etc who have the money and can easily enter into this market
- Japan trading companies are the biggest customers for steel manufacturers. SG suddenly doesn’t become the biggest client. They’re hoping that being an Indian player would give them bargaining power since Marubeni (biggest steel trader) for example has the luxury to buy in 50 countries and buy from the lowest priced provider
- There’s no govt approval needed for trading in steel. I hope you’re not just copy pasting from chatGPT
- Even biggest steel manufacturers aren’t safe from steel fluctuations. Any issues in credit lines, working capital shortage will lead to inventory costs. India has become a net importer of steel, even with tariffs imports are cheaper – https://www.reuters.com/markets/commodities/indian-steelmakers-seek-higher-tariffs-chinese-imports-surge-2024-09-26/
- Demand is definitely there in India and SG can grab a huge chunk of the pie and I am bullish on their prospects. My major concern is valuations here → no margin of safety and no barriers to entry.
