Steel cos raise output as demand picks up

Domestic steel makers Ispat, Essar and JSW, who had cut metal production last October citing low demand, have now either resumed full scale operations or increased their production levels. This is due to pick up in demand besides levy of 5% import duty on steel products which has helped steel makers in doing away with piling inventories, say senior executives in the steel firms. Last year in October, companies including Essar and Ispat slashed production by up to 40% to correct the demand-supply mismatch. JSW too followed suit and cut production by 20% in November. Together, the three firms constitute one-fifth of the country's total production, which stood at nearly 56 million tonnes in 2007-08. "Though we have resumed full scale production at existing plant in Vijayanagar (Karnataka), the decision to start commercial production from the new line would be taken shortly. We expect it to become operational within this quarter," said a senior executive at JSW Steel. Recently, the company added a 3 million tonne production line to its existing 4 million tonne capacity in Vijayanagar. Although other private steel makers such as Ispat and Essar are yet to commence full scale production, they gradually increased production levels from December-end onwards. Both the firms are currently operating at about 75% of the capacity. Since prices have fallen steeply in the domestic spot market, steel producers expect upward movement in demand for domestically produced products in the coming months. Says Ispat Industries executive director (finance) Anil Sureka, "The financial meltdown has impacted entire commodity market severely including the steel industry. As a result, we preponed the upgradation and modernisation of blast furnace. Now that the demand has shown improvement, blast furnace would get fully commissioned by February-end." Ispat's annual steel production stands at 3.4 million tonnes. Essar, which produces 3 million tonne of steel annually, has also shut shut down its plant partly due to low demand. Says Essar steel Holdings CEO J Mehra, "Markets are looking up and we intend to resume full-scale production by the end of this quarter."