Indian pipe makers may shift production out of India
June, 03rd 2008
Live mint reported that Indian steel pipe makers, hurt by a 10% export duty, could shift their production out of India.
Mr Ashok Punj MD of PSL Limited said that "We were already planning to expand capacity of our Sharjah plant to 300,000 tonnes per annum from 75,000 tonnes, but the export duty notification has made us expedite the plan. We expect to complete the expansion in next 12 to 16 months."
Mr Prasanto Sengupta director of corporate finance at consulting firm KPMG said that "If export duty continues over the long term, then one way to get around it would be to get to the market they are servicing or being closer to those markets. I do not see manufacturers immediately shifting base if they have huge CAPEX in India, but if the duty continues over a long term, they might just have to."
Steel pipe makers such as Jindal Saw Limited and Maharashtra Seamless Limited export 25% to 40% of their output, while Man Industries Limited and Welspun export about 80% every year.
According to industry experts, demand for steel pipes is expected from West Asia and other Asian countries, which account for 45% of the global demand, followed by North America at 33% and Europe at 16%. This demand is expected to grow significantly and Indian companies are already considering capacity expansions.
India is a major exporter of steel pipes, particularly to companies in West Asia and the US such as Exxon Mobil Corporation, Chevron Corporation and Saudi Aramco and caters to one third of the global demand. But with the tax, on top of a near 40% rise in steel prices in the past 6 months, steel pipe makers said they would need to make the pipes overseas to remain competitive.