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Bhavnagar's steel rolling mills in tight spot

Rutam Vora  |  Mumbai/ Ahmedabad 

Amidst rising input costs and slowing demand for finished steel products, the Bhavnagar-based owners are facing tough time to keep their profitability intact. The units have cut down the price of finished steel products including by at least 15 per cent in recent weeks.

According to industry players, a fall in the demand from infrastructure sector including housing and project construction is affecting the earnings of the industry.

"There is a steep fall in the demand for finished steel products including TMT bars, sheets and mild steel ingots from the infrastructure sector. Meanwhile, the price of raw material including steel plates and scrap have risen in recent past. So, while our earnings suffer due to low demand, high input cost is hurting our profitability," said Mayank Agarwal, rolling mill owner and member of Sihor Steel Rolling Mills' Association in Bhavnagar district.

The input cost for have shot up by at least 25 per cent in past two months as the scrap prices have increased from Rs 19 per kg two months back to Rs 24 per kg recently. The industry sources most of the raw material from Kandla and Gandhidham in Kutch.

The largely unorganised have increased the prices of finished products by at least 15 per cent in past two-three weeks. The price for TMT bar, according to an industry source, has increased by at least Rs 2 per kg to Rs 29 per kg.

Industry insiders hold RBI's rate hike move responsible for the shrink in the demand from construction sector.

"After the RBI rate-hike, banks too increased their interest rates, which has put brakes on the construction activity to some extent. Moreover due to monsoon season, the demand was already less and interest rate hike by the banks came as a final blow for rolling mill owners," said J P Delivala, past president, Bhavnagar Chamber of Commerce and Industries.

"The demand for in the category of 12 mm, 14 mm and 16 mm has dropped significantly. These varieties are mainly used for large construction projects. The units being fragmented and localised, they are unable to bid for the government projects so that opportunity is also not there," said a rolling mill owner from Sihor.

There are about 40 steel rolling mills operational in this region having a daily production in the range of 400-500 tonnes.

The Bhavnagar-based industry holds about 45 per cent share in Gujarat's steel rolling mills industry.

First Published: Mon, August 15 2011. 00:25 IST