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Steel pipe maker PSL Ltd's Sharjah-based subsidiary, PSL FZE, Hamriyah, has been awarded an $80-million contract for the supply of bare line pipes to the Saline Water Conversion Corporation (SWCC) of Saudi Arabia.
The project comprises construction of a water transmission system from Ras Azour in the eastern province of Saudi Arabia to Hafr Al-Baten in the central system, constituting API 5L Grade X-65, 44-inch diameter pipes for a total length exceeding 350 km.
Commenting on the deal, Mr Ashok Punj, Managing Director, PSL Ltd, said, “With this order from SWCC, the installed capacity of the Pipe Mill at PSL FZE, Hamriyah, shall be fully utilised from April 2011 to May 2012.”
Setting up second plant
The company is adding another pipe mill of capacity of 75,000 million tonnes a year at PSL FZE, Hamriyah, taking the total capacity to 150,000 million tonnes a year. The installation of the second mill is in an advanced stage of completion.
Mr Punj added that another offer of an approximate value of $200 million for a water transmission pipeline project of over 600 km of pipe has been submitted by PSL Ltd, India, and PSL FZE, Hamriyah. The offer is also under active evaluation.
PSL also announced that it is well equipped to cater to this upward trend in demand for steel pipe growth in various markets, as it maintains a direct manufacturing presence near energy, water and infrastructure centres via its PSL FZE facility.
The facility commenced operations from its Sharjah-based facility in mid-2007, with a capacity of 75,000 million tonnes per year. The plant provides pipe supply and coating services for onshore and offshore applications within the United Arab Emirates, Saudi Arabia, Oman, Qatar, Kuwait, and other locations in West Asia.
A revenue boost
BL Research Bureau adds: PSL's order, worth about Rs 360 crore, through its wholly-owned subsidiary, may be material to its revenues as it expands its reported order book by between 20 and 25 per cent to around Rs 1,800-1,900 crore. This is to be executed over the next one year.
The company managed Rs 2,400 crore of revenues in the first nine months of 2010-11, suggesting a lower run rate than 2009-10 when net sales hovered at Rs 3,800 crore on a consolidated basis.
Matching that performance while holding on to margins appears a challenge, with high raw material costs and a competitive steel pipe market, whose best players operate at around 50 per cent utilisation levels.
With projected demand from infrastructure spending and oil pipelines in the latter half of 2010 not quite panning out as expected, pipe players have been waiting for order flows to pick up.
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