Steel makers halts scrap imports on weakening rupee.

CHANDIGARH: Continued slide in rupee against US dollar has hit Punjab iron and steel industry hard with steel makers deciding not to make fresh import of scrap until the domestic currency stabilises.

"We have decided not to import scrap as weakening rupee against US dollar has made our business unviable and many of steel makers are facing very heavy losses," Induction Furnace Association of North India President K K Garg told reporters today.

"In this uncertain situation, it has become very hard for us at what rate we should book import of scarp as rupee is constantly falling against dollar, which results in enhancing our cost considerably," he said.

The rupee today plunged to fresh low of 55.47 per dollar before closing at 55.39 per dollar.

Punjab secondary steel makers are one of the biggest importers of high melting scrap from various countries including Europe and Middle East for using it as input to produce secondary steel. In Punjab, over 200 induction and arc furnaces import about 2 lakh tonne of scrap per month to convert into iron and steel.

Importers who did not resort to hedging for protection against currency fluctuations faced heaviest amount of losses in import of scrap. "I will be incurring a loss to the tune of Rs 60 lakh in import of 2000 tonne of scrap because of sharp depreciation of rupee against dollar," a Mandi Gobindgarh based Rolling mill owner said.

"I never imagined that rupee will come down so sharply against US dollar. Had I gone for dollar hedging, my losses would have been much lower," he said.

According to furnace owners, the scrap is now costing Rs 3,500 a tonne costlier to them because of currency fluctuation. Price of scrap varies between $ 480 to $ 500 a tonne.

With demand for steel products remaining subdued, steel makers are even unable to recover the import cost of scarp from their finished products, they rued.

"We cannot pass on the rising input cost to customers as the demand (for ingot) is not there to absorb the hiked cost in the industry," said Garg.

Furnace owners also blamed their bankers for not rescuing them from this crisis situation. "Our bankers are now reluctant in raising our credit limit even though they are aware of the fact that weakening of rupee has increased our cost manifold," said Garg.

Punjab's secondary steel manufacturing capacities are concentrated in Mandi Gobindgarh, Khanna and Ludhiana, catering to construction, light engineering sector.

Source : economictimes.indiatimes.com