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Sep 28, 2011, 05.22 PM IST
Nirupender Rao, chairman of Pennar Industries Limited which sources steel from JSW talks to CNBC-TV18 of the difficulties and the way ahead for the company.
Below is the edited transcript of the interview. Also watch the accompanying video.
Q: Have you had trouble getting steel from JSW and what is the amount of steel or percentage of your steel that you source from this company?
A: As of now,we have not had any trouble, e have enough stock to last for a month or so. We do buy from a number of sources that is JSW in Vijaynagar, JSW in Tarapur, Ispat which is now a part of Jindal, Essar Steel , Tata Steel , SAIL and Lloyd Steel.
Jindal Vijaynagar, the Mysore unit, is going to be in difficulty, going ahead. If they have to shutdown for a short while, then we have to alternately ask them to supply from their Tarapur plant and the Ispat plant. We will then have to increase our purchase from Essar, Tata, SAIL and Lloyd to make up for that.
Q: Has that meant that there is a slight hardening of prices?
A: Hardening of prices is not a different reason because generally, the steel prices are benchmarked with imports. The imports have gone up because the rupee has appreciated from Rs 45 to Rs 50, so definitely, there is hardening of the prices by about Rs 1,500-2,000. It will not be surprising if we find that the prices increase a week from now by this extent.
Q: There was a news report that quoted your MD as saying that we source close to about 10,000-11,000 tonne from JSW, and now with the huge production cuts, our production could take a hit too. You are denying that at the moment?
A: Not exactly. Heís slightly wrongly quoted. When he meant by JSW is from three sources from the Vijaynagar plant, Tarapur plant and Ispat that we treat as JSW now. Ispat plant and Tarapur is in Maharashtra, so those two plants wonít be affected. The fact that we do buy from them will affect us little bit in the short run, but we will step up our purchase from Essar and Tata, SAIL and Lloyd and also imports. I think we will make it up.
Definitely, there is a matter of concern when one of your important supplier reports that they may shutdown. For how long, we donít know. Hopefully for a short while, so there is going to be some effect but we could overcome that.
Q: Itís a huge plant and there will be many vendors like you who would be affected so the absence of that quantity of steel should be having its repercussions on both the speed of supply as well as the price, wouldnít it?
A: Yes, definitely on the supplies. As I told you, the prices generally move in tandem with the overseas imported price because one can bring in imports and make do the shortfall. So the imported prices and the Indian steel prices generally move in tandem and the rupee has gone up from Rs 45 to Rs 50 per dollar. So it is to be expected that even before this news item of Jindal Steel came, even last week, we were hearing that the steel prices might get increased from the beginning of next month. Thatís got nothing to do with Jindal per se closing down, but obviously, one important steel plant shutting down one of its plant may aggravate the situation, there is no question on that.
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