The Hindu Business Line : Rising steel prices upset auto component makers

STUNG by the rising prices of alloy steel material and the shortfall in supply from domestic producers, the automotive and auto component industry has stepped up dialogue with steel manufacturers.

"The situation is really grave as the alloy steel industry in the country is already operating at full capacity and is unable to meet the full requirement of the burgeoning growth of the automotive and component industry," said Mr K.V. Shetty, President, ACMA, in a release.

To continue the dialogue that commenced last month to discuss the core problem of prices and availability of alloy steel, a joint meeting was held with the Alloy Steel Producers Association (ASPA) by the Society of Indian Automobile Manufacturers (SIAM), Tractor Manufacturers Association (TMA) and the Automotive Component Manufacturers Association of India (ACMA) at Mumbai last week.

The meeting was attended by vehicle, tractor, auto component manufacturers and major alloy steel producers, including Mukand, Jindal, and Usha Martin.

Mr Shetty said that since alloy steel producers have been incurring heavy losses over the last few years, they are unable to invest further to step up capacities.

"This situation, if not immediately addressed, is bound to lead to a very serious material shortage in the near future," he added.

The auto component industry is heavily dependent on alloy steel for the manufacture of many critical, export-oriented and machined components.

Using domestically produced raw materials has helped it retain the competitive edge and enabled it to cross the $1-billion mark in exports.

Earlier last month, the automotive industry - through its apex associations - held a joint dialogue with the steel producers, represented by the Indian Steel Alliance, during which the steel producers agreed to hold the prices till June 2004 and also to enter into long-term contracts with steel users.

According to Mr Shetty, the component industry is aiming at an export target of $2-5 billion in the next five years, apart from catering to the growing demand of the Indian automotive industry.

If adequate steel capacity in the country is not made available, it would seriously hamper the industry's export drive in the context of the global outsourcing exercise by global majors, he said.

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