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Steel companies focus on exports to benefit from weak rupee

KOLKATA: With the rupee continuing with its free fall against the dollar, steel companiesare redrawing their export strategies to make the most of windfall gains coming their way. In this new found thrust on exports, Indian steel makers are increasingly looking at markets in the Middle East & North Africa,South Asia and even Europe to beat low demand at home. 

The fall in rupee will make imports costlier, thereby curbing the volume in next few months. This has brought some cheer to steel companies which are going through one of their most depressing phases. 

"Rupee depreciation has helped steel exports which have gone up in last few months," said SAIL chairman CS Verma. SAIL hopes to double exports to 7 lakh tonnes this year, up from 3.7 lakh tonne in 2012-13. 

Essar Steel, one of the largest steel exporters, hopes to raise exports by over 25% to 1.4 million tonne (mt) this year, up from 1.1 mt it did last year. "We are exporting to Middle East, Africa, South East Asia, and even Europe," a company official said. 

"Rupee depreciation, along with a weak domestic steel market and capacity expansions, is forcing steel producers to sell more abroad," said Giriraj Daga, analyst at Nirmal Bang Securities. This year, steel exports crossed one-million mark to touch 1.13 mt in what is a seasonally weak first quarter. 

In 2012-13, even as capacity went up to 90 mt, exports hobbled at around 4.7 mt. This year estimates suggest exports could rise almost 30% over last year. With its products finding a good market in Africa and the Middle East, Jindal Steel & Power Ltd (JSPL) also wants to increase its exports this year. 

"We want to increase exports to 15% of our increased production base in 2013-14. We see huge opportunities for export, particularly in Middle East & North Africa," a JSPL spokesperson said. 

Producers like Essar Steel feel the time is ideal for government to take decisive action on policy front to raise export volumes. "Exports have stagnated at around 4.5 mt since 2003-04. This can be increased by 3-4 mt easily," H Shivramkrshnan, Chief Commercial Officer, Special Projects, Essar Steel said. 

Domestic consumption remained flat in the first four months of the FY14 growing a mere 0.2% to 24.1, mt due to poor offtake from consumer and auto sector. Steel production however, grew by 3.1 % to 26.1 mt during the April-July FY14, from 25.3 mt during the April-July FY13.