Excerpts from the AR 2010
STEEL INDUSTRY
Industrial climate during the year has improved particularly for the Steel Industry, Automobile and Auto Components Sectors. TheIndian Steel Industry also witnessed the recessionary conditions during the financial year 2008 -2009, but recovered in the latterpart of the year and the trend continued in the financial year under review.
The Alloy steel industry in general also showed goodimprovement in production, commensurate with the demand of steel for automobile application. The growth in the manufactureof commercial vehicles during the year was significant. In other areas of automobile industry, motorcycle production has showntremendous growth which improved the demand of alloy steel for component manufacture for this industry.
SUNFLAG STEEL having entered into the areas of manufacturing of wire rod and bars of alloy and special steel, aftercommissioning vacuum degassing, has benefited from this increase in alloy steel demand.
MATERIAL DEVELOPMENT
Taking advantage of the increased demand for its product, SUNFLAG STEEL has been able to increase its production andsales during the year by about 52% and 23% respectively over the previous year. Due to abnormal rise in the cost of inputs suchas iron ore and coke, full benefit could not be realised.
In order to achieve effective cost reduction and improvement in productivity, activity of Total Productive Maintenance (TPM)continued to be implemented by the Company during the year under review.
OPPORTUNITIES
SUNFLAG STEEL see more opportunities in the years to come due to continuous developments of new grades of highalloy steel as well wire rod and cold rolling sheets. Further, venturing into the self dependency of raw material and power indecreasing in the cost of production and enhancing the profitability.
THREATS
The global slowdown, raising and fluctuating prices of raw materials and energy cost (power and fuel) is adversely affected theoutput prices thereby causing hardship to the customers. The availability of the quality raw materials viz Iron Ore, Coal, LAMCoke is the cause of concern for the industry.
A quick read through this, it appears that as a producer of alloy steel/special steel, the automobile industry is the main customer for its finished steel products. So, if the auto industry is going to do well in FY11, Sunflag should do well too.
The flip side is raw material cost trends. Anyone has clear inputs on that? The captive power plant actually produced less power in FY10 than FY09??