Domestic steel capacity, the main as well as the secondary producers together, is likely to touch 60 million tonnes (mt) by the end of the current financial year. Currently, the total domestic steel capacity is around 56.84 mt. “From April to October 2007, the total production of the industry was 30.31 mt. Annualising this, for the entire year we expect the production to be around 55 mt. Assuming that the capacity utilisation is maintained at 90 per cent, like it has been in the last couple of years, we expect the annual capacity to be slightly over 60 mt,” an official in the Steel Ministry told Business Line. Last year, the production of the domestic industry was at 50.85 mt and from April to October 2006 it was at 28.72 mt.
The official, however, was unable to quantify the exact amount of investment made by the companies during the expansion process because a substantial portion of the new capacity has come up through brownfield expansion utilising the available infrastructure in existing plants. “Generally, a greenfield project for a 1 mt steel plant would require around Rs 3,000 crore. “Since most of the brownfield expansions are met through de-bottlenecking the investment, they would cost far less and should be between Rs 1,000 and Rs 1,500 crore,” the official said. The year, however, saw exports taking a hit because of the appreciation of the rupee against the dollar.
“This year the exports would be in the region of around 5 mt. Till the end of October, the exports were at 2.9 mt as compared to the imports which were at 3.6 mt. “This is mainly due the appreciating rupee and the industry felt that since it was getting a better price in the domestic market there was no reason to export more. “But since we import goods under the Export Promotion Capital Goods (EPCG) scheme, there was an export obligation which had to be met,” an industry source said. The industry also believes that the capacity figure could be slightly over 60 mt as some of the units may utilise more than 100 per cent of the capacity due to the increase in demand. Also the Steel Ministry has undertaken a revision of data with special reference to the secondary sector individual furnace units. “Since it is very difficult to get the exact production data of the secondary producers, the Ministry has undertaken an exercise to get the capacity and production data of the secondary steel producers in the country,” the official said.
Source: The Hindu Business Line
29th December, 2007