India: fall in demand for steel and alloys

A sharp fall in demand from the automobile industry and a steep rise in power costs have led to the closure of over 150 small steel units across India. These units are mostly in the alloy steel and mild steel sectors. While the former is used to make auto parts, mild steel is used in making long steel products for the construction industry. In 1994–5, there were over 180 mini steel plants churning out products for the auto, forging, bearing and construction industries. However from 1997 onwards, a steep fall in demand combined with oversupply saw these units incurring huge losses leading to the closure of over 150 plants by the end of 2000. Moreover since most of these units used the electric arc furnace process, steep power tariffs also rendered their operations unviable. In 1995–6, the total installed capacity in this sector stood at 6.5 million tonnes.After the mass shutdown, this figure has come down to 2.6 million tonnes in 2000-01. This is still in excess of demand, which currently stands at 1.6 million tonnes. Some of the major alloy units that have closed down are Pratap Steel (five plants), Ishar Alloys, Sanghvi Steel, Raipur Alloys, Remi Metals, MP Iron, Kusum Ingots, Ellora Steel, Firth India and Bihar Alloys. These units are mostly concentrated in western and southern India.

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