Pennar, APL Apollo Tubes fear earnings hit

Customers of JSW Steel have begun feeling the pinch of drying up supplies.

Two of its biggest clients - Pennar Industries of Hyderabad and New Delhi-based APL Apollo Tubes - apprehend their earnings will be impacted if JSW is unable to meet their monthly demand.

“We source close to 10,000-11,000 tonnes of the total 15,000 tonnes we require every month from JSW Steel. Now with the huge production cut, we could take a hit too,” said Anantha Reddy, managing director, Pennar.

“I could lose customers.”

Pennar is a diversified value-added steel producer and is a major player in cold-rolled products, auto components, wind, solar and pollution control equipment.

It sources HR and CR coils and galvanised and colour coated coils from JSW’s Vijayanagar plant.

Reddy said he is yet to hear from JSW on possible supply delays and hopes the company surmounts the situation soon.

“So far the demand side was very weak so our needs were limited, but with festive season just round the corner, our demand could rise.”

Sanjay Gupta, managing director of APL Apollo Tubes, said the company might see a 10-20% erosion in earnings if the supply declines and prices are increased.

“The word on the street is that companies might increase prices by Rs3,000 per tonne from the first week of October. Besides that, if JSW cuts some supply, we will see our yearly numbers being impacted,” Gupta said.

A few months back, JSW Steel had informed these companies that being OEMs and long-term buyers, their supplies would not be hit.

Now with JSW cutting production by a stunning 70%, the are waiting for the axe to fall.