Standalone secondary manufacturers are facing liquidity crunch over currency demonetization. Thus they are forced to reduce production to maintain balance between demand-supply and liquidity crunch.
Most of the medium size plants have cut down their operations and running units for 12 hrs instead of 24 hrs in a day, according to industry participants. This situation happened in Raipur, Durgapur, Rourkela, Mumbai, Jalna & Ahmdedabad (Central, East & Western India). These plants include standalone Induction furnaces, rolling mills & hot rolling mills.
Sources also reported that few Ingot/billet manufacturers in Raipur, Durgapur, Rourkela & Ahmedabad have temporarily halted operations which do not have any stock of raw materials i.e. sponge iron & scrap.
Moreover, sponge manufacturers are also planning to curtail production as demand seems to be sluggish on falling Ingot/billet production. In general sponge manufacturers are keep their raw materials (Iron ore & coal) inventory for 15 days or for a month duration.
Following major reasons reported:
1. This major plants do cash sales so post demonetization led to liquidity crunch.
2. Poor finish sales as real estate industry buyers postponed new project to understand impact of demonetization.
3. High input cost compared to low sales realization. Present offers of sponge C-DRI at INR 14,000/MT and ingot at INR 20,600/MT; Conversion spread at INR 6,600/MT in Raipur.
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