Falling prices of commodities will result in significant savings for ongoing steel capacity expansion projects in the country. A dip in structural steel and cement prices is further expected to slash expansion cost.
Steel companies are also expecting lower prices on new orders for equipment.
Steel Authority of India (SAIL), which is raising capacity from 13 million tonnes (MT) of saleable steel currently to 24.5 MT by 2011-12 at a cost of Rs 54,000 crore, expects the bill to be considerably lower.
“We will reassess the investment once we place the orders which will be in the next few months,” SAIL Chairman S K Roongta said.
The second phase of expansion of Jindal Stainless in Orissa, which would take the capacity from 0.7 MT to 1.5 MT would now cost Rs 6,000 crore — the original cost that was approved a-year-and-a-half ago.
After the project was approved, prices increased by 30-40 per cent and suppliers were asking for revised rates. Now, we are re-negotiating even for equipment, which have been ordered,” Arvind Parakh, director for strategy and business development, Jindal Stainless, said, “We have put our project on hold for 15 days during which we’ll re-strategise.”
Sajjan Jindal-controlled JSW Steel expects to save 20-25 per cent on civil and steel fabrication works at its Bengal project. Seshagiri Rao, director-finance, JSW Steel, said the initial investment planned for the Bengal project was Rs 4,000 crore. Now, the company expects a saving of 20-25 per cent on civil and fabrication works.
Neeraj Singal, managing director, Bhushan Steel, said the 2.5-5 MT expansion, which was to cost in the range of Rs 7,000-8,000 crore, will cost less on the falling market.
The company is now planning to speak afresh to equipment manufacturers for reduction in costs.
Prices of structural steel such as TMT bars, which were at Rs 28,000-32,000 a tonne eight months ago increased to Rs 42,000-45,000 a tonne in July, while plate prices increased from Rs 40,000- 45,000 a tonne to Rs 50,000-55,000 a tonne during the same period.
