Steel rods face weak demand

Despite it being the peak season for product sales industry is suffering


Sujata Awale
Kathmandu

As the government has not been able to carry out development projects smoothly, it has directly affected demand for construction material like steel rods. Despite it being the peak season for construction product sales, the steel rolling mill industry is suffering. The steel rod industry has not only witnessed a halt in its year on year market growth of around 15 per cent til last year but it has also experienced a slump in demand by over five per cent. The market, which consumed 315,000 tonnes of steel rods last year has now been confined to approximately 300,000 tonnes of steel rods. However, there is adequate stock in the market and the price of steel rods remains the same at Rs 84 to Rs 86 per kg as in the previous year.

According to Nepal Steel Rolling Mills Association (NSRMA), the total market for steel rods is 500,000 tonnes per year. Reportedly, there are 30 registered rolling mills, out of which only 17 factories are in operation. Industrialists stated that political instability, lower development activities and non opening of new projects are the main reason for low demand of construction material. Of late, Nepal is heading towards self-dependence in steel rods, but is still dependent on India for raw materials.

“There is no demand for construction material owing to slow paced development activities in the country,” said Dhruba Kumar Shrestha, President of NSRMA, adding that expenditure from the development budget has been nominal till the end of the third quarter of this fiscal year. He said, “The government could not introduce new development projects like hydropower, infrastructure development and housings, which directly hampered our business.”

Citing that there was high demand but low production last year, he said, “Although production is smooth this year, demand is low." Complaining that load shedding is the major hindrance for the sector, he said, “Due to severe power cuts, we are confined to operate at only 50 per cent of the installed capacity.”

“Usually, the period between mid-January to mid-March is the peak season for steel rods and the price of the products also soars during this period," Biswo Pudassaini, Sales and Marketing Manager at Panchakanya Steels, adding that however, the price is the same as demand is low. “Slow-paced development activities are the main cause for lowering demand," he said, adding that the sluggish real estate sector is also a cause for low demand.

There are two types of steel rods being manufactured for construction. Steel rods made up of prime billets is superior and are more expensive while those made up of ingots are of low quality and inexpensive. Panchakanya, Himal, Sakha and Hama Steels are some companies that produce prime billet rods. "There is a healthy competition among manufacturers using prime billets while there is unhealthy competition among manufacturers using secondary billets and ingots," said Pudassaini. According to him, Panchakanya enjoys 20 per cent market share in the rolling mills industry.

"We have witnessed 20 per cent growth in sales this year," said Raju Kumar Thapa, Deputy General Manager at Hama Steels. He informed that Hama Steels have resumed operations eight months ago after upgrading with new technology and 600 tonnes installed capacity. "We are using the latest technology and are the first one to use primary root base billets to produce quality steel rods," he said. "As of now, there is no sign of new projects opening. However, we are expecting some next month," Thapa opined. According to him, they enjoy 10 per cent market share.

"Customers here are still unaware about the quality of steel rods. They look for affordability rather than quality," said Thapa, adding that they plan to have campaigns to make people aware of the significance of quality products. According to him, the unique selling proposition of their products is ductility, strength and uniformity of consistency.