Lloyd Steel managing director (and promoter) Rajesh Gupta, who hotly denied industry rumours that the company had ceased operations, admitted to a more than 15 per cent cutback in production.

The company is the tiniest hot rolled (HR) steel producer in the country, a segment that has been unable to make margins on sales for close to two years now.

Hot-rolled steel producers have trimmed production countrywide, but in the case of Lloyds, the impact of the dwindling demand for steel is the most dramatic. (Last year, when all the HR producers showed a decline in profitability, Lloyds Steel was the only company to actually post a loss (of Rs 58 crore.) It is relevant to mention here that steel makers expect 1998-99 to prove much worse than last year.

Lloyds is among the most vulnerable in the industry, since it is less equipped to weather a storm. Unlike other HRmakers, who cater to a wider market, Lloyds focuses on a niche market and limits its production to hot rolled coils, cold rolled (CR) coils and galvanised (GP/GC) sheets and plates.

Gupta admitted that he did not expect an improvement in returns this year, even though sales were 10 per cent higher in value terms. The drop in the volume of sales had come from lower orders. ``We produce entirely against orders,'' Gupta said.

The company has a capacity to make four lakh tonnes of HR coils and 1.8 lakh tonne of cold rolled products, apart from GP/GC sheets and only operates those facilities, that its order book demands. The discerning shut downs however, have been become more frequent since September last year.

``They say, production is vanity and profit is sanity,'' Rajesh Gupta told The Financial Express on Tuesday. This year, along with low demand and low prices at home, Lloyds also found its export prospects declining. The company sells close to 70,000 tonne of pipes and 30,000 tonne of GP/GC sheets inthe overseas market.

Lloyds is the best example of the quagmire the steel industry is in general and HR producers are, in particular. It is not the only company to have effected selective shut-downs in operations, though.

Market leader, the Steel Authority of India Limited (SAIL) has taken down two blast furnaces in Bokaro for ``capital repairs,'' even as a blast furnace remains out of operations (for capital repairs) at its Bhilai Steel Plant. Despite better sales in February, the public sector giant's HR inventory is believed to be 1.25 lakh tonne. Industry sources say Essar Steel and Ispat Industries may producer less HR coils, sheets and plates than they did last year. Countrywide, the production of hot rolled coils and skelps was 3.97 million tonne between April last year and January this year, which is slightly lower than last year.

Major steel producers like SAIL, Tata Steel and the Rashtriya Ispat Nigam Limited (RINL) made only 2.14 million tonnes of HR coils and skelps, compared to the plannedoutput of 2.19 million tonnes. The apparent consumption of hot rolled coils and skelps alone (computed by subtracting exports from home production and imports), slid by 3.75 per cent between April last year and January this year. Hot rolled coils users apparently bought only 3.85 million tonne of steel, compared to four million tonne in the first 10 months of the 1997-98 fiscal.