Steel Companies Seek Government Relief Over Propane Supply Shortages

Indian Steel Industry Seeks Relief from Propane and Butane Shortage

Key Developments:

• Indian steel majors, including Tata Steel and JSW Steel, have requested the central government to allocate propane and butane for carbon steel and coated steel production.
• The Indian Steel Association (ISA) sent a letter to the Ministry of Steel (MoS) and Ministry of Petroleum and Natural Gas (MoPNG) on March 7, seeking relief from the Essential Commodities Act, 1955.
• The government invoked the Essential Commodities Act, 1955 on March 10, prioritizing natural gas and LPG supply.

Industry Impact:

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• The diversion of 80% of propane supply to priority sectors has impacted coated steel production, which relies heavily on pure propane for high-heat processes.
• Coated steel products, including color-coated and galvanized sheets, are among the highest-margin offerings for Indian steelmakers, driven by strong demand from sectors such as construction, infrastructure, and appliances.
• Major producers like JSW Steel and Tata Steel are increasingly investing in downstream capacity to capture greater value, with coated products forming a key part of their high-margin, value-added portfolios.

Supply Chain Disruptions:

• The prioritization of household LPG has directly impacted industrial sectors, such as coated steel production, which relies on pure propane for high-heat processes.
• JSW Steel units are facing potential shutdowns due to the shortage of propane.
• The coated steel business in India is dominated by a few large integrated steel producers, including JSW Steel, AM/NS India Ltd, Jindal Steel, and Tata Steel.

Financial Implications:

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• The production units are still functioning because they have up to 20 days of stock; the impact will be felt later if the supply continues to be restricted.
• The shortage of propane and butane may lead to a decline in coated steel production, resulting in financial losses for the industry.