Public sector steel major SAIL has deferred some of its expansion plans in view of the global economic slowdown and less than expected growth in domestic demand. The company is now expected to reach the targeted capacity of 23.4 million tonne (mt) of the hot metal by mid-2015. The earlier plan was to achieve the same by the end of 2013. The PSU’s current capacity is 18 mt, a fifth of the country’s total installed capacity of primary steel.
Taking the capacity to 23.4 mt involved investments to the tune of R72,000 crore. Of this, the company has placed orders worth R58,911 crore for plant and machinery and over 85% of the amount has already been spent. However, SAIL chairman CS Verma told FE the company will now slow the expansion process, taking into account the dismal market conditions. In other words, the entire R72,000 crore for total capacity addition of 5.4 mt will be spent only by mid-2015.
Apart from less-than-expected demand growth, the company also cites geographical surprises at construction sites and other technical issues for the late completion of expansion, which entails volume growth and technological improvements. ?SAIL has decided to complete 23.4 mt of capacity by around July 2015. While the main work associated with the expansion projects would be completed as scheduled, steel production would be ramped up only if there is demand in the market,? said a top official involved with the board operations of SAIL.
The objective of SAIL’s on-going modernisation is fourfold ? volume expansion, infusion of new technologies along with phasing out of obsolete ones, enrichment of product mix and capacity expansion of captive mines to ensure higher raw material production to feed the manufacturing capacity.