Steel makers to cut prices, production targets to be revised

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New Delhi, Oct 12 : Indian steel makers may cut prices and as also production in tandem with dip in demand in domestic market spawned by a global slowdown.

The growth targets may also have to be revised from double digit to single digit, though the long-term expansion plans of companies could remain intact, they added.

“The production growth in the steel sector is likely to decline to 8-9% this year from the expected 12-13% due to global economic slowdown,” JSW Group Chief financial officer Sheshagiri Rao said.

Indian steel companies would have to cut prices to survive, else domestic market will be flooded with cheaper imports, he said.

Globally, steel prices have softened by about $350 per tonne in the last couple of months, alluring large-scale consumers to go for cheaper imports from countries like China and Ukraine.

“The global turmoil has affected demands and put pricing pressure in the US. These would have a ripple effect on Indian market too,” an Essar Group spokesperson said.

British steel giant Corus, part of Indian conglomerate Tata group, has already said it is taking steps to optimise production as per the changing demand scenario.

Even as the dynamics of global economic market continues to change, the domestic steel firms don’t see its impact on their long-term expansion plans. “We have secured finances for our projects lined up till 2010. In this scenario, however, raising capital from abroad will not be easy,” Rao said. India’s largest steel producer SAIL too said the crisis would not affect its expansion plans as it has enough financial resources.

“There will be more or less no impact on us, but housing and construction sector will take a beating,” SAIL director commercial Shoeb Ahmed said. SAIL does not borrow money from abroad, nor does it export products in huge quantities, he added.

Emails sent to Tata Steel, JSPL, Ispat Industries remained unanswered.

Steel secretary P K Rastogi, while admitting a temporary slowdown in demand for the alloy, said “it would be too early to jump to any conclusion with regard to decline in production growth and effect on long-term expansion plans of companies”.

Rastogi said domestic steel prices have not come down to the level they have internationally and the demand for the alloy is expected to pick up from this month.

On cutting steel production amidst the decline in demand globally, steel minister Ram Vilas Paswan last week had said there was no case for it as India’s infrastructure sector continues to grow.

Many Chinese steel mills have reportedly decided to cut production by up to 15% due to slump in demand and declining prices.

Recently, world’s largest steel producer ArcelorMittal had announced a cut production at its various units across globally.

In the first half of 2008, steel prices were at a higher pedestal, mainly on the buoyed demand from China, where 29th edition of Olympics were held. The demand fueled steel prices, which almost doubled from last year’s level.

Thereafter, steel consumption declined, mainly due to lack of demand from the infrastructure sector in the midst of global slowdown.

Consuming industries have also withheld their demand expecting a further fall in prices leading to a additional decrease in consumption.