In the prevailing economic slowdown and sluggish steel market, the RINL, Visakhapatnam Steel Plant, has acquitted itself well, according to a company statement.
The RINL has been facing a tough market situation where the steel prices have come down by around Rs. 5,400 per ton and the competition has made companies to offer incentives, discounts, and credits. This has forced RINL to slash its prices sharply between Rs. 5,000 and Rs. 7,000 per ton apart from offering market incentives.
In the country, long products consumption registered a negative growth of 1.3 per cent and bars and rods consumption was further down with a negative growth of 1.8 per cent till December, 2012, compared to the previous year. The situation in Andhra Pradesh was more critical due to continuing power crisis as well as problems relating to supply of sand in the beginning of 2012-13.
The RINL is one of the main bar and rod producers in the country and its main market is in Andhra Pradesh and other southern states. Lower consumption of long products and sluggish market affected sales of RINL during the past eight to 10 months.
In order to maintain steady sales, the company has been using these market tools after proper examination by the duly constituted committees to enable sales and prevent accumulation of inventory.
Despite this, prices of RINL prevailing in the market are either same or above those of competitors and, because of a little higher price, RINL has been losing orders from the big customers/industries in tenders and other mode of sales.
In steel market, all producers have been adopting the same strategy.
The RINL could still achieve sales of Rs. 13,650 crore during 2012-13. With concerted effort, the inventory has been brought down to 12 days stock. RINL does not have captive iron ore and coal mines and is paying over 65 per cent of production cost towards raw material.
In spite of the handicap, profitability is better than several steel companies having captive raw material sources.
The company has started the current year, 2013-14, on a positive note, the note adds.