At a small coating unit in Pune, half-finished steel coils have been lying idle for days after production stopped mid-cycle. What would typically be a continuous process has been interrupted by something as basic as fuel availability, leaving both machinery and orders in limbo.
Across the country’s metal MSME clusters, similar disruptions are playing out as a shortage of LPG and propane, which are key fuels for reheating, annealing and coating, forces units to shut or scale down operations. The crunch, triggered by the ongoing conflict in West Asia, has sharply increased fuel costs and made supplies erratic, hitting smaller downstream manufacturers the hardest.
LPG cylinders that earlier cost around Rs 1,400 are now being sold at nearly Rs 6,000 in the black market, while payment cycles from buyers have stretched to two to three months. For units operating on thin margins, this dual pressure is proving difficult to absorb.
What do industry players say?
Enlight Metals’ downstream facility in Pune has remained shut for over 10 days due to the lack of gas, Vedant Goel, director at the company, told Fe. “The process of coating, which is instrumental for a lot of downstream steel production, requires LPG. With the shortage and skyrocketing prices, we had no option but to halt operations at the unit,” he said.
Goel said the uncertainty has reduced planning visibility to a day-to-day basis, with erratic fuel availability forcing the company to run below optimal capacity and delay deliveries. The company supplies to automobile and white goods manufacturers, where disruptions tend to cascade quickly across the supply chain.
“With 1,500 clients depending on us, even a few days of disruption creates a backlog and puts pressure on our relationships with OEMs,” he said. Plans to start exports have been put on hold due to higher fuel costs, elevated shipping rates and the inability to run coating lines consistently.
“If this LPG situation continues, it doesn’t just affect our margins; it affects jobs, future investments in value-added steel, and the confidence to commit to long-term contracts, both in India and overseas,” Goel said.
Widespread disruption
The disruption is widespread. In the Ghaziabad belt, a small stainless steel unit was forced to shut mid-cycle after its LPG supply failed to arrive, rendering partially processed material unusable and leading to immediate losses. According to the Indian Stainless Steel Development Association, about 40–50% of smaller units are either shut or operating intermittently, while others are running at sharply reduced capacity.
“In Mundra, cold rolling and export-oriented units are operating at around 50% capacity, while in eastern clusters like Jajpur, downstream units are seeing utilisation levels drop to nearly 60–70% due to constrained fuel availability and input disruptions,” said Rajamani Krishnamurti, president of the association.
For an industry dependent on continuous processes, such interruptions carry high costs. Sudden stoppages can damage furnaces and require expensive restart cycles, turning short disruptions into prolonged financial strain. The sector’s reliance on West Asia for fuel supplies has compounded the problem, with alternate sourcing routes also facing logistical bottlenecks.
The impact is extending beyond production to labour availability. In clusters such as Aurangabad and Pune, industry executives said a large share of workers in auto-linked factories have returned to their hometowns, partly due to LPG shortages affecting daily cooking needs. Companies are attempting to retain workers through stop-gap measures, but with limited success.
One firm procured induction stoves for its workforce, but ran into shortages of basic utensils needed to use them. Even where operations continue, costs are rising. Canteen expenses have increased, with per-unit tiffin costs rising from Rs 120 to Rs 160 as vendors pass on higher fuel costs.
Logistics disruptions are adding another layer of stress. Shipping routes around the Strait of Hormuz have been affected, leading to vessel delays, rerouting and higher freight and insurance costs. Exporters are facing longer lead times and increased working capital requirements as goods remain in transit for extended periods.
“We are seeing 10–20 day extensions in lead times due to Cape of Good Hope rerouting, and for a mid-sized steelmaker, that means cash-in-transit has effectively doubled. Inventory is piling up at Indian ports and factory gates because exporters are being forced to prioritise only high-margin SKUs just to offset the freight surge,” said Suryansh Jalan, chief business officer at logistics technology firm FarEye.
Container freight rates on Asia–Europe routes have risen from $1,000–$1,600 per box to $3,500-$4,000 in the spot market, alongside additional war-risk and emergency surcharges. For smaller exporters operating on fixed-price contracts, these costs are difficult to pass on.
“For a small aluminium downstream player operating on fixed-price letters of credit, none of this is passable to the buyer — you either postpone dispatch or you ship at a loss just to keep the client,” Jalan said.
The result is a squeeze on both sides. Input costs are rising while order visibility weakens, forcing some firms to absorb losses to retain customers. For smaller players with limited balance sheet strength, the disruption is beginning to test business viability, even as there is little clarity on when fuel supplies and logistics routes will stabilise.