Stronger Re pushes Jindal Stainless to domestic mart

Jindal Stainless, India's biggest producer of the alloy, will sell more to domestic customers as a stronger rupee makes exports less competitive.

The company plans to cut sales to nations including, China and Taiwan, to 30 per cent of its production in two years from 50 per cent, Managing Director Ratan Jindal said in an interview in New Delhi yesterday. Jindal makes 600,000 tonnes a year at present.

India's rupee is poised for the biggest annual advance this year against the dollar since at least 1974, hurting exporters. Jindal is seeking to benefit from domestic demand growing at a 12 per cent clip and falling input costs to tide over a stronger currency. The price of nickel, the main raw material, has almost halved from its May peak.

"We want to concentrate on the Indian market and also take advantage of falling costs because of the stronger rupee,'' said Jindal. "Our dependence on China will more or less disappear," he added.

Nickel for immediate delivery may average between $27,000 a tonne and $30,000 a tonne next year, Jindal said. That compares with this year's average of $37,783 a tonne. Nickel futures traded in London reached a record $51,800 a tonne on May 9.

Jindal Stainless in October reported that its second-quarter profit had been more than halved as sales declined and raw material costs rose.

Earnings in the quarter ending December 31 may change little as some users defer orders amid expectations that falling nickel costs would drive down rates of stainless steel.

South Korea's Hyundai Steel Company has cut output of cold- rolled stainless steel several times in the past six months because some customers held back new orders. Rivals in China agreed in July to reduce supply by a fifth amid a local glut.

"The fall in nickel is bad news for us in the short term as customers hold back to watch if prices fall further,'' said Jindal.

"Profit in the current quarter as a result will be flat but we can expect it to improve next quarter onwards.''

Jindal Stainless shares fell 1.5 per cent to Rs 232.10 on the Bombay Stock Exchange. The stock has almost doubled this year to a record. Hyundai Steel has surged 157 per cent in the period, faster than the 57 per cent gain in the 30-stock Bloomberg Asia Pacific Iron/Steel index.