'RINL unlikely to meet sales target in August'

Pricing war, weak demand, allowance of imports to hurt company sales

The pricing war in the domestic steel market, coupled with the weak demand, is expected to hit the sales of Rashtriya Ispat Nigam Ltd (RINL) this month, a source close to the development told Business Standard on Tuesday.

For this month, the company had set a sales target of 3,00,000 tonnes. “So far (in August), only about 32,000-33,000 tonnes of steel has been sold and so, the 3,00,000-tonne target seems difficult to achieve in the current environment,” the source said.

In July, the company had sold 2,00,000 tonnes, 19 per cent more than in the year-ago period. Value-added products, which generate better revenue than traditional products (for the same quantity), clocked better sales, the company had said in a statement.

RINL primarily produces long products, which are used in the infrastructure sector.

Apart from weak fundamentals, another concern for the company is the government’s approval to the import of steel and steel products for critical applications, without meeting local quality specifications. “Allowing steel for sectors such as defence is agreeable, since the technology needed to make that kind of steel product does not exist in the country. But including the infrastructure sector is certainly going to pose a problem for Rashtriya Ispat,” the source said, without stating the extent of the loss RINL would have to bear due to the relaxation in steel imports.

On the pricing front too, RINL is at a disadvantage, owing to its high cost of production compared to peers such as JSW Steel, Tata Steel and Steel Authority of India. “We do not have captive iron ore mines and so, our cost of production is Rs 5,000-6,000/tonne higher compared with peers,” said a company source.

“So, we lose out. Now, with the allowance of imports, things would be more difficult for the company.”

Against the market trend, RINL has kept the prices of its products unchanged for August.