Fuel supply restrictions cause problems for steel companies
Indian steel producers which rely on natural gas energy for their steel
production are experiencing major problems due to the government's giving priority to the fertilizer and power companies in supplying natural gas.
According to recent news in the market, 80% of the total natural gas produced in
India is being supplied to the fertilizer and power sectors, with the remaining 20% distributed among steel, transport and other various sectors. However, with the transportation sector's increasing demand for natural gas as a fuel, the steel industry, which has a requirement of approximately 6% of the country's total
production, is only receiving 3% of its share.
India produces approximately 65 million metric standard cubic meter (MMSCM) of natural gas per day, while the steel industry has a requirement of roughly 4 MMSCM. Accordingly, the Indian Steel Ministry is reporting that steel producers are filing complaints over what they call “discrimination”.
Moreover, the shortage of natural gas supply is forcing steel producers to limit their
production capacity. According to market sources, Indian steel producers such as Ispat Industries, Essar Steel, and Vikram Steel are facing enough demand to be able to increase their
production by at least 10%, but are unable to do so because of the restrictions on fuel supply.
Another problem for steel producers caused by the fuel supply restrictions is increasing cost of
production because producers are now forced to buy liquefied natural gas (LNG) at Rupees 7 per SCM as opposed to the compressed natural gas (CNG) which costs significantly less at around Rupees 4 per SCM.