Leading steel producers including JSW, Essar, Ispat Industries have resorted to production cuts following a steep decline in demand amid the global economic slowdown. They are also aiming to clear their piled up inventory as they fear a further fall in prices, which have already nosedived globally; buyers have withheld their bulk orders anticipating a further correction in the rates.
Of the domestic producers, the Sajjan Jindal-led JSW Steel today said it would rationalise its product mix as per current market conditions and appropriately modify its production programme to effectively reduce total production by around 20 per cent from November.
Ruia-led Essar Steel and Vinod Mittal-led Ispat Industries are already operating below optimum capacity. "It is true that our steel plants are operating at about 75 per cent of their capacities," an Essar Group spokesperson said. An Ispat Industries official said the company is adjusting its production as per the prevailing market conditions, but declined to give any figures.
Integrated steel maker Jindal Steel and Power Ltd said it is looking to bring down cost of production and ease other input pressures on the company's margin. "We are working on cost cutting among other measures in the present market conditions. But we are not announcing any production cut," the company's director (finance) Sanjay Maru said.
The country's largest steel producer SAIL, however, will not prune its output in response to the slump in demand. "We are not cutting our production, but have lowered the prices in tandem with the softening global trend," a SAIL spokesperson said.
A few days back, the world's largest steel producer ArcelorMittal and Tata Group company Corus announced cuts in production by as much as 30 per cent and 20 per cent respectively.
Steel prices have declined from the high of $1,250 per tonne in March-April this year to $ 500 a tonne in the international market. In line with the softening global trend, Indian firms have also reduced steel prices to about Rs 32,000-36,000 a tonne from the high of Rs 55,000 a tonne earlier this year.
State-run Rashtriya Ispat Nigam Ltd had cut steel prices by a maximum margin of up to Rs 8,500 a tonne. SAIL, JSW Steel, Ispat Industries, Essar Steel have also slashed rates in the range of Rs 4,000-6,000 a tonne to ward off the threat of cheaper shipments from China and Ukraine.
The country's leading steel producer Tata Steel, however, has not yet announced a price cut, saying it is weighing its options.
The price cut by major steel producers comes at a time when the industry awaits the government's decision on its demand for imposing a 15 per cent duty on steel imports among other fiscal measures. The steel ministry is, however, believed to have asked the finance ministry for imposing a 10 per cent import tariff.
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