MMTC rids transformer firms of costly silicon steel

To import in bulk to minimise the higher price effect

The state-owned Metals and Minerals Trading Corporation (MMTC) has come to the rescue of transformer makers, which are grappling with higher silicon steel prices, by helping them import the crucial input at cheaper rates.

Industry sources said international manufacturers of silicon steel had formed a cartel as a result of which prices have zoomed exorbitantly over the past one year. Available at $1,200 a tonne a year ago, silicon steel is now quoting at $4,000.

Domestic transformer majors were finding it difficult to cope up with high silicon steel prices as their primary consumers, power utilities, were not ready for a hike. Transformer prices had gone up by about 40 per cent last year owing to rising prices of silicon steel, which is fully imported.

The price of a 160 million volt ampere (MvA) transformer has gone up to Rs 3.3 crore against Rs 2.5 crore a year ago. The price of a 63 KvA transformer has increased to Rs 60,000 a unit, a 50 per cent increase over Rs 40,000 a year back.

Steel makers generally do not venture into silicon steel on account of high input costs and lesser returns. "It takes an investment of over Rs 300 crore for setting up a silicon steel plant," said an industry source.

Since MMTC will buy silicon steel in bulk at a far lower price than the procurement cost of transformer makers, it will pass on a portion of the benefit to them. MMTC is also looking at producing silicon steel at its plant in Orissa.

A official with the Indian Electrical and Electronic Manufacturers Association, the representative body of transformer makers, said, "International steel majors such as Posco and Nippon Steel have agreed upon discounts to MMTC if the steel is sourced in bulk, say about 80,000 tonne to 100,000 tonne.

Transformer makers would hold a meeting with MMTC officials on October 7. The objective is to gain the long term commitment from these companies towards MMTC.

The meeting should also decide on the quantity and the price at which the commodity will be bought from international steel makers," said. The domestic transformer industry will need 1,20,000 tonne of silicon steel next year. The industry, with an annual capacity of 80,000 MvA, is growing at 22 per cent.

The major transformer makers are Bharat Heavy Electricals, Crompton Greaves, ABB, Emco and Alstom. While Thyssenkrupp, British Steel, Posco and Nippon Steel are some of the major producers of silicon steel globally. POWER PLAY

International manufacturers of silicon steel had formed a cartel as a result of which prices have zoomed exorbitantly over the past one year

Domestic transformer makers are unable to pass on higher costs to consumers

MMTC will purchase silicon in bulk at considerably lower prices and pass on the benefit to local transformer makers