Global slowdown hits SEZ plans of Essar, Welspun

The plunge in the overseas steel market and subsequent growth in domestic demand have changed the special economic zone (SEZ) plans of Essar Steel and Welspun Gujarat Stahl Rohren Ltd, two leading players in the steel industry.

While Essar Steel may scrap its proposed steel SEZ at Hazira, Welspun Gujarat is considering shifting its existing unit outside the Engineering SEZ at Anjar in Gujarat.

“Essar Steel is looking at doing away with the SEZ status. Welspun has invested about Rs 300 crore in its steel pipes manufacturing unit inside the SEZ. The company has informed us that it is planning to shift this unit outside the SEZ, after paying all the import duties,” said a senior official in the SEZ Development Commissioner’s office.

Welspun Gujarat had proposed to invest Rs 767 crore as a developer and Rs 458 crore for its unit.

While confirming the thinking on Hazira, an Essar spokesperson said: “The export market is still a matter of concern. We have to look for alternatives.” Essar has so far invested about Rs 8,000 crore in three manufacturing units and about Rs 200 crore of a proposed Rs 1,000 crore as a developer, sources said.

"Welspun Gujarat is considering a lot of domestic orders, so we are aiming to relocate our unit outside the Engineering SEZ. To cater to international orders, we already have our recently commissioned facility at Little Rock in the US. The domestic demand for steel pipes is on a rise, especially with Reliance's KG Basin project and the expansion plans of GAIL," said an official of Welspun Gujarat, on condition of anonymity.

Both the developers have so far not attracted any outside investors to set up their units in their SEZs, industry sources said.

The global steel industry is estimated to be about $500 billion and it has been going through a rough phase for some time, in the wake of slowdown in core sectors like housing, construction and transportation. “The global demand for steel is down by 15 per cent to 1,080 mt in 2009, as per estimates by World Steel Association. The Indian ministry has indicated that India’s production will double from 65 mt to 124 mt by 2011-12,” said Tejas Seth, senior research analyst of SMC Global Securities Ltd.