labels: Economy - general
Steel companies cut back production as demand slackens news
07 November 2008

Mumbai: Following the lead of the world's largest stel maker, Arcelor Mittal, some of the major Induian steel producers including Jindal Steel Works, Essar Steel and Ispat Industries, have scaled down production following a steep fall in demand and a big jump in inventories.

Earlier this week, ArcelorMittal had announced plans to cut production by a whopping 35 per cent, due to the gklobal economic slowdown, inly in the steel and auto sectors. (See: Slowdown forces ArcelorMittal to cut output by up to 35 per cent)

The rising inventories have already started pressuring prices and steel companies fear a further rise would leave them with no option than further cut prices.

Steel prices have nosedived globally with buyers withholding bulk orders anticipating a further fall in prices and steel firms can no longer afford to pile up stocks, they say.

JSW Steel envisages a 20 per cent reduction in output, beginning this month as it rationalises product mix as per the current market conditions and modifies production programme accordingly.

Ruia Group's Essar Steel and the Vinod Mittal-led Ispat Industries are already operating below capacity Essar steel plants are operating at about 75 per cent of their capacities, while Ispat Industries merely said it was adjusting production as per the prevailing market conditions.

Integrated steel manufacturer Jindal Steel and Power Ltd said while it was not announcing a production cuts, it was looking to bring down the cost of production and ease other input pressures on the company's margin.

Country's largest steel producer SAIL, however, does not plans to prune output in response to the slump in demand.

For Indian steel majors the slowdown has come at a time when they were planning large capacity additions.

Riding on the strong financials in the recent years, Indian steel majors are adding new capacity aggressively. JSW Steel is close to completing a 3 million tonne expansion project in the next few months. The company is also going ahead with a new 10 million tonne plant in West Bengal.

Tata Steel has also recently added 2 million tonne capacity at Jamshedpur. A further addition of 2.9 million tonne is planned for the same site. Tata Steel is also planning two greenfield projects in Orissa and Jharkhand.

Other firms that have planned new capacity include Essar Steel and SAIL.

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Steel companies cut back production as demand slackens