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India's Seamless Pipe Firms Stare at Job Cuts: Industry Body

Time: 2017-02-14
New Delhi: India's Rs. 15,000-crore seamless pipe industry is staring at a spectre of large scale job cuts and plant shutdowns due to dumping by China at "rock bottom" prices in the domestic market, say industry insiders.

China is facing anti-dumping and safeguard duties from countries like the US, the European Union, Canada, Indonesia, Brazil and Mexico, and is also saddled with a large inventory due to subdued demand back home.

This has led to China's steel seamless pipe producers to export products to India at low prices, adversely impacting domestic industry, market insiders said. 

Seamless steel pipes - used in oil, gas and power sector - are sold by domestic companies at about Rs. 47,000-50,000 per tonne, while Chinese products are being sold at about Rs. 25,000-30,000 a tonne, they said.

Top firms such as Maharashtra Seamless, Jindal Saw and Indian Seamless Metal Tubes (ISMT) are witnessing almost no demand for their products in the domestic market due to large scale availability of cheap products from China leading to plant shutdowns and job losses.

So far Maharashtra Seamless has shut down one facility and retrenched up to 800 people followed by ISMT with up to 500 jobs and Jindal Seamless with up to 300. Besides, both Jindal Saw and ISMT are running at only 15 per cent of their total capacity.

"If this situation continues for another 2-3 months, we will see as much as 8,000 direct jobs being lost and much more indirect job cuts, besides plant shutdowns. We will have no other option but to take such a step to," Association of Seamless Pipes and Tubes Vice President S Sarkar told PTI.

The Indian seamless pipes industry - with a capacity of 1.5 million tonnes (MT) - provides employment to a total of 25,000 people of which 12,000-15,000 are directly employed.

"That apart, such a scenario also jeopardises up to Rs. 8,000 worth of loans that these companies took for capacity expansion and other works," he added.

Four years back, 65 per cent of sales of Indian firms came from the domestic market, but that has gone down to almost zero in fiscal year 2014-15. Not even a single firm got any orders from India last year. All went to Chinese, Mr Sarkar said.

The only order in the last fiscal year came from Indian oil firms for about 150,000 tonnes of seamless pipes, which was bagged by Chinese firms. Not even a single order went to any Indian company, he added.

"How can we compete with the Chinese, who are selling at rock bottom prices of Rs. 30,000 a tonne when our raw material costs comes at around Rs. 31,000 per tonne. It is not possible. Now only if government steps in with Anti-dumping or Safeguard Duty the industry would have some chance to compete," he said.

China has a capacity of about 25 MT, of this only 10-15 MT is absorbed in the market there. So, with a stock of about 15 MT and no other markets globally to export, India is the destination for the producers there, he added.

A similar situation is faced by flat and long steel products. Domestic steel makers are also battling cheap imports from China, South Korea and Japan.

The government recently imposed anti-dumping and safeguard duty on various flat and long steel products to save the domestic industry.

"We are urging the government to consider our situation and impose regulatory measures to save the industry. We may not be as big as other steel industries but a lot of investment is made here also and many people depend on us for their livelihood," Mr Sarkar said.

The next orders are expected to come only by September 2016 from the domestic market and the global market is also not very optimistic. So Indian firms have no incentive to keep producing and on top of that, cheap imports are adversely impacting the market, he added.

Unless a high anti-dumping duty on import of seamless pipes from China is not imposed immediately the seamless pipes mills in India are surely going to die their deaths soon, he rued.

"China can further cut costs as its weakening domestic demand and growing debt load is making it harder for producers to pay back from sales to the domestic market. Also they are saddled with large unutilized capacities and are looking to export what they can't sell domestically," Mr Sarkar said.

The oil and gas sector globally is witnessing a rough phase due to over-capacity and weak prices, he further said.

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