Steel cos cut output on gas supply woes

NEW DELHI: Faced with supply constraints in industrial gases and disruption in global shipping routes triggered by the West Asia conflict, steel companies across the country are cutting production, senior company officials said.

They said the steel sector is facing pressure on several fronts, including shortages of LPG and LNG, which has started to affect production and logistics, disruption in raw material flows of limestone from Oman and UAE, increased freight rates, which are hurting margins and order cancellations of some export shipments to West Asia due to uncertainty in shipping routes.




Abhyuday Jindal, MD of Jindal Stainless, said fuel constraints forced the company to cut capacity at plants. “Due to the heavy dependence of stainless-steel manufacturing on industrial gases such as propane, LPG and natural gas, several processes across our plants are adversely impacted. Given the constraints in fuel availability, our plants are operating at a rationalised capacity,” he said, adding that shipping disruptions are also leading to longer transit times and cargo delays.

MSME companies are also seeing production cuts. Harsh Bansal, MD of BMW Industries, which produces value-added steel products, said one of the company’s plants is running at around 50% capacity after supply constraints. “After the conflict broke out, propane prices increased about 17%. We also received a notice that plants using propane gas would be shut due to unavailability,” he said, which would result in lower production of roughly 8,000 to 10,000 tonnes.

Dhruv Goel, CEO of market intelligence firm BigMint, said availability of vessels tightened as ships remained stuck in the Gulf region, pushing up freight and insurance costs. “Steel prices have already risen by about Rs 2,000 to Rs 2,500 per tonne in the past few days due to higher energy and logistics costs...export cargoes to West Asia and Europe are also facing delays,” said Goel.

Industry body AIIFA Sustainable Steel Manufacturers Association has written to the ministry of steel, stating that the crisis would affect operations of secondary steel units.