The Hindu Business Line : Irregular silicon steel supplies to transformer makers — MMTC to enter into long-term contracts with foreign firms

Industry & Economy - Electrical Goods

Irregular silicon steel supplies to transformer makers — MMTC to enter into long-term contracts with foreign firms

Amit Mitra

Transformer manufacturers have been badly hit by the irregular supplies of the specialised steel and its increasing prices.

Mumbai, Oct. 7

IRON ORE is one raw material that is of no direct use to electrical transformer manufacturers, but it is this very mineral that may improve their bottomlines in the coming months.

Indeed, the Government may leverage the country's huge reserves of iron ore, which has become a vital raw material for Japanese and other global steel-makers, to get an increased allotment of silicon steel, a critical input for transformer manufacture by the steel producers. The Government is concerned that inadequate supplies of silicon steel and its ballooning prices in the last 18 months may trip its ambitious power reforms programme, as transformers form a vital link in this circuit.

MMTC move: Industry sources say that the state-owned MMTC has initiated a move to come to the aid of the transformer manufacturers by sewing up long-term bulk contracts for import of silicon steel with the foreign steel producers. MMTC is the canalising agency for export of iron ore to Japanese and other global steel makers, which are the suppliers of silicon steel to the domestic transformer industry. And hence, MMTC is well placed to "put some pressure" on the foreign steel producers to increase their allotment of silicon steel to India, the sources said.

MMTC's initiative comes in the wake of the Power Ministry taking up the issue of irregular supplies of silicon steel with the Commerce Ministry, which is the umbrella ministry for MMTC.

The Power Ministry was keen on MMTC helping the transformer manufacturers by forging long-term contracts."MMTC has shown positive signals that it will help us (transformer industry) to get assured supplies of silicon steel. MMTC has asked us to give our long-term and short-term requirement, after which it will take the initiative to sign up long-term contracts with the foreign suppliers. We expect something positive to happen within the next one month," says Mr S.K. Sehgal, General Manager of Crompton Greaves and Chairman of Indian Electrical Equipment Manufacturers Association's Transformer Division.

There are about 70-odd major manufacturers of transformers, of which some 20 companies, such as BHEL, Crompton Greaves, ABB, Alstom, Transformers & Rectifiers (India) Ltd (TRIL) and EMCO, control about 80 to 90 per cent of India's production.

Industry requirement: The transformer industry has informed MMTC that while its short-term (six to nine months) requirement of silicon steel will remain at about one-lakh-tonne per annum, its requirement is likely to go up to two to three lakh tonnes within the next three-four years.

Transformer manufacturers have been badly hit by the irregular supplies of the specialised steel and its increasing prices. "About 18 months ago, the cost of the steel ranged from Rs 11,000 to Rs 17,000 per tonne, but today the prices are Rs 4,000-5,000 per tonne, depending on the quality of the product. We were compelled to cut production," Mr Jitendra U. Mamtora, Chairman and Managing Director of TRIL, told Business Line.

The reason for the shooting up of prices and irregular supplies is largely ascribed to the increased consumption of China, which uses about three lakh tonnes of the material every year. To accentuate the trend, one of China's steel mills that produces silicon steel had to be shut down temporarily.

Mr Sehgal feels that if MMTC can forge long-term contracts with the suppliers, the prices would come down, as contract prices are over 60 per cent less than spot prices.

"For example, the spot prices at present ranges from $4,000 to $5,000 per tonne, while the contract prices are between $2,000 and $3,000," he pointed out.

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