Low demand in both the global and domestic markets and dumping of cheap products by producers in Russia and China have led to piled-up inventories with local steelmakers.
To set this right and support prices, domestic firms are cutting production.
While JSW Steel has said it would cut output by 20% from November, Ispat Industries will slash 15%. Essar Steel said it’s looking at ‘rationalising’ production, while Bhushan Steel Ltd will chop galvanised steel output by 20-30%.
The only ones who have not bitten the bait – and aren’t likely to anytime soon – are giants Tata Steel and Steel Authority of India Ltd (SAIL), mainly due to their product profile and long-term nature of sales contracts – where steel is sold up to one year ahead, mainly to automobile companies and consumer durables makers.
Tata Steel, the world’s sixth largest steelmaker with an annual crude steel production capacity of 30 million tonne per annum (mtpa), is not even thinking of lowering output. On the contrary, its production would actually increase because of the modernisation and expansion of its Jamshedpur plant, said Koushik Chatterjee, chief financial officer. The expansion was completed in October and the capacity now stands at 6.8 mtpa.
“The impact of the slowdown on Tata Steel will be lower than on other Indian steelmakers as we have mostly long-term contracts and a strong distribution network,” said Chatterjee.
State-owned SAIL, India’s largest steel producer with a turnover of Rs 45,555 crore, can sail through the bad times as it has large sales contracts with “projects of national importance” that won’t stop despite the economic headwinds.
S K Roongta, chairman, said that SAIL would utilise its full crude steel capacity. It will convert this crude steel to finished steel, which is seeing good demand.
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