India: Infra companies urge govt to plug rebar supply gap

Of late, the supply shortage of TMT bars has stalled highway projects across the country even as steel prices have skyrocketed, the National Highways Builders Federation (NHBF) has informed the government urging the authorities to provide a "level playing field to all stakeholders in the economy" to provide steel for infrastructure projects.

Supply Vacuum

SteelMint has a copy of the letter NHBF wrote to the Prime Minister dated 16 Dec'21 complaining of the "exorbitant price rise of TMT steel by the primary steel producers" and the "vacuum that has been created in the supply chain management" of rebars for highway and expressway projects.

While the delivery time for steel for road projects was only a few days previously, the primary steel producers today are quoting a "lead time of 30-40 days after placing of orders." Obviously, this is having an adverse impact on projects undertaken by both the National Highways Authority of India and the Union Ministry of Road Transport & Highways, the letter states. Notably, the letter came a few days after Union Road Transport Minister Nitin Gadkari accused steel companies of raising prices to abnormal levels.

Price hikes by primary producers

In a separate attachment with the letter, NHBF has shown that rebar prices of primary steel producers have increased by over 53% in the Jul-Oct'20 period even as government data reveals that consumption of finished steel has fallen by 25.6% in the Apr-Oct'20 period. Therefore, the "assertion by some of the leading steel producers that the price of steel is increasing due to the increase in consumption doesn't hold water," the letter states.

Urging the government to take suitable measures to control rising TMT prices and the supply vacuum in the market, NHBF suggests that the government ought to allow other stakeholders - the secondary steel producers - to supply material for big infrastructure projects.

Plea for diversifying supply

SteelMint has recently reported that Maharashtra-based steel producers too have urged the government to source steel from MSME producers who have upgraded technology in recent times to cater to quality of products to be used for government works.

SteelMint had earlier reported that a Ministry of Road Transport & Highways notification dated 28 Oct'20 states that if the primary steel producers (BF-BOF route manufacturers) are "unable to supply the steel within the required time period", supply from secondary steel producers are allowed, provided these producers manufacture TMT bars from "billets procured from original producers".

However, stakeholders and experts have argued that the chemical specifications of TMT bars ought to be taken into consideration - instead of the manufacturing route - while purchasing steel for infrastructure projects.