• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest
• The New Manager

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

R.Y. Narayanan

Targets better price margins compared to the construction industry

Mecheri (Salem district) April 27 The Southern Iron and Steel Company Ltd (SISCOL), which has seen a turnaround in its fortunes after its takeover by the O.P. Jindal group, has decided to increase its focus on meeting the needs of the auto sector and on the manufacture of special grade steel required by the oil and gas sector because of the higher margins these products command compared to the products required by the construction industry.

The company is also studying the feasibility of exploiting the iron ore available in Kanjamalai in Salem district and Kavithamalai in Tiruvannamalai district to meet its raw material needs.

Speaking to newsmen at the plant premises after a board meeting to consider the fourth-quarter results for 2006-07, Mr J.K. Tandon, Chairman, SISCOL, said that at present 50 per cent of the production met the requirements of the construction industry while the balance consisted of products to serve the needs of the automobile and oil and gas sectors.

Confident of approval

Already, the company was servicing vehicle manufacturers like Ashok Leyland, Tata Motors and Ford through its vendors and it was also trying to become a supplier to Hyundai. The company was in discussion with all major automobile manufacturers and supplying steel to their vendors such as MICO, Lucas, Delphi and Automotive Axles.

The company was confident of getting further approvals. Apart from product quality, saving on freight was another advantage since SISCOL was located close to many vendors.

He said the company was a major supplier of special spring steel, producing about 5,000 tonnes/month that could be increased to 8,000-10,000 tonnes per month. It was also a major supplier of forging grade material and it wanted to substantially increase its market share in that product. He said about 600 kg to 700 kg of steel/steel products was used in each car. The Indian auto industry produced about 4 million vehicles annually, including heavy/light commercial vehicles, cars, two/three wheelers and the auto industry alone required about 1 million tonnes of steel a year.

The export of auto components — steel is a critical raw material — was also growing at a scorching pace and by 2012-2015, exports are likely to reach $20 billion.

Price choice

On what prompted SISCOL to focus on the automobile industry, Mr Tandon said the company took a conscious decision to focus on the automobile sector and on special steel products because of the better price they commanded and the factory had required facilities to make high quality steel.

He said when the company's production reached 1 million tpa, nearly 40-50 per cent of the production would be to meet the requirements of the automobile industry, 20-30 per cent would be special steel for the oil and gas sector and the rest would go to the construction industry. But by 2010-12, the company planned to reduce the share of construction steel in favour of special grade steel.

On the reasons for the slippage in the execution of the capacity expansion project to 1 million tpa, which was to have been completed by March 2007, the SISCOL Chairman said there was "tremendous order booking" by the equipment manufacturers because of the surge in the expansion of steel manufacturing capacity, leading to some delay in meeting the supply deadlines.

Expansion underway

As SISCOL's plant is in operation, the construction work has to be taken up without disturbing the existing production schedule and without putting at risk the employees on the job. But for a few months' delay, the project work was going on as planned.

The expansion project was expected to cost Rs 1,320 crore and construction of captive power plant of 60-MW capacity (2 X 30 MW with one unit based on coal and the other gas-based) would cost about Rs 120 crore. The commissioning of the power plants would make SISCOL almost self sufficient in power and it would also help improve the financials of the company due to the low cost of power generation.

Mr Tandon said the quality of iron ore available in Salem and Tiruvannamalai districts was similar to what was found in Kudremukh in Karnataka. He said the iron ore needed to be upgraded and felt that it would be commercially viable.

On whether the company was on the look-out for any acquisition, he said the company wanted to be a major player in the steel industry and was looking at opportunities for growth.

More Stories on : Outlook | Steel | Tamil Nadu

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
2 Lupin projects selected for funding

Copyright © 2007, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line