Punjab secondary steel industry slashes production by 30%

Punjab’s secondary steel industry has been forced to cut down production by 30% due to the steep rise in cost of raw materials due to weakening rupee, dealing a crippling blow to the industry.

Apart from this, some of scrap importers are not even taking delivery of their import consignments, fearing higher payments.

"Steel makers including induction furnaces in Punjab have cut down their output by up to 25-30 per cent because of rising US dollar against Indian currency as they will have shell out more on importing scrap," All India Steel Re-rollers Association President Vinod Vashisht told PTI.

Steel producers meet 95 per cent of their requirement by importing high melting scrap from several countries including the UK, Dubai and Africa for making steel ingot.

Punjab has about 200 induction furnaces with daily production capacity of 10,000 tonne per day. Rupee, which dropped to two year low is hovering over Rs 49 per US dollar.

As greenback rose sharply, the import cost per tonne of scrap has shot up by Rs 2,500 per tonne, resulting into squeezing margin of furnace owners in light of suppressed demand for iron and steel.

"How can we afford to meet the additional cost of import (Rs 2,500 per tonne) caused by depreciating rupee as margin in furnace are wafer thin," Mandi Gobindgarh based Modern Steel Limited, Chairman, Amarjit Goyal said.

The demand for steel particularly from construction sector in Punjab has been sluggish for the past four months in view of monsoon season.

Steel re-rolling mills have also become victim of reduced output by induction furnaces as they were not getting adequate ingots for making steel products.

Custom House Agents even pointed out that as import cost has risen sharply by importing scrap, some of traders and importers are refraining from taking delivery of containers.

"The impact of rising US dollar on importing containers of scrap is expected to come into effect in next one month,” KCM (Cargo handler), MD, Pradeep Chaudhary said.

About 5,000 containers containing scrap are imported into Punjab every month by furnace owners as raw material. Punjab is a major manufacturer of secondary steel in the country and manufacturing capacities are concentrated in Mandi Gobindgarh, Khanna and Ludhiana.