July 25, 2008

India imposes ban on export of pig iron by PSUs

ET reported that, in yet another move to check spiraling steel prices, the government has imposed a temporary ban on export of pig iron by public sector companies like Steel Authority of India Limited, Rashtriya Ispat Nigam Limited and MMTC controlled Neelachal Ispat Nigam Limited.

The move is aimed at supporting the export oriented foundry and casting units that have been complaining about supply constraints and steep rise in prices of pig iron.

Official sources said that the centre is planning to hold an auction for the pig iron produced by the public sector companies for domestic buyers at their existing prices. Domestic buyers will get 10 days to make purchases, following which the PSUs will be allowed to export the left over metal. The advertisement for the auction will be released soon.

A government official said that "Since the auction for domestic players will give opportunity to all buyers to source as much as they want at existing prices, the problem of supply constraint and rising prices is expected to be addressed. Export of pig iron from SAIL and NINL has already stopped. We are going to come out with the advertisements soon."

Since prices of PSUs are much lower than those maintained by private companies, giving first preference to domestic buyers will ensure the foundry and casting units will have access to more supplies from them than before. This may also encourage other private sector players to reduce prices and look for opportunities in the domestic market itself.

Pig iron production in India is around 5.5 million tonnes. Even though the quantum of exports is low, it is likely to grow with more players entering the business. PSUs are expected to play a stabilizing role by preventing widening of demand supply mismatch in the domestic market.