Tuesday, November 11, 2008

Slowdown hits steel sector

With the impact of the global financial crisis having slowed down economic growth all over the world, the Indian steel companies are also feeling the heat. Taking a cue from European steel giant Corus that has decided to cut production by 30 per cent, leading steel producers have decided to resort to production cuts following decline in demand for the commodity.

Many steel companies, including Sajjan Jindal-owned JSW, Essar Steel and Ispat Industries have announced various measures to counter the slowdown in demand and economy in an effort to prevent any further pile up of inventory. With prices softening over the last few weeks, companies are making every effort to clear the backlog which has gone up as buyers have withheld bulk orders anticipating a further correction in rates.

Integrated steel maker Jindal Steel and Power also said it was looking to bring down the cost of production and ease other input pressures on the company’s margin. According to company director (Finance), Sanjay Maru, the company was working on cost cutting measures among other measures in the present market conditions. However, Steel Authority of India Limited (SAIL) has decided against any such move and will continue to pursue its plans. The company has not cut production but led the industry in lowering prices. Steel prices have declined from the high of $1,250 a tonne in March-April this year to $500 a tonne, in the international market.

In line with the softening global trend, Indian firms have also reduced steel prices to about Rs. 32,000-36,000 a tonne from the high of Rs. 55,000 a tonne earlier this year. State-run Rashtriya Ispat Nigam had cut steel prices by a maximum margin of up to Rs. 8,500 a tonne.

SAIL, JSW Steel, Ispat Industries, Essar Steel also slashed rates in the range of Rs. 4,000-6,000 a tonne to ward off the threat of cheaper shipments from China and Ukraine. However, there has been no word on the issue from Tata Steel.

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