Sucheta Dalal :US gas pipeline growth drives Indian manufacturers
Sucheta Dalal

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US gas pipeline growth drives Indian manufacturers  

October 26, 2009

Welspun Gujarat Stahl Rohren announced a surprising piece of news that its oil and gas pipeline order book size has crossed Rs10,000 crore. Jindal Saw Pipe also reported to have pending orders worth $750 million (Rs3,750 crore). PSL’s order position is also very strong at Rs6,000 crore. Despite the recession in the US, when most companies were making best of efforts to equalise their previous year turnover, this industry has seen an unprecedented bunch of orders worth two-three years of sales.

The cause is gas pipeline capacity addition in the US. During 2008, 84 natural gas pipeline projects were completed in the US for a total length of 4,000 miles of natural gas pipelines. These can carry about 43.9 billion cubic feet (bcf) of gas to the national natural gas pipeline grid. For these projects $11.6 billion has been spent, which is thrice the amount spent in 2007. Some 65 of these projects involved expansion of the interstate natural gas pipeline network. At the close of 2008, EIA’s (US government energy online site) inventory of proposed pipeline projects reflects a potential addition of about 35.40 bcf per day of natural gas pipeline capacity during 2009. The year 2009 may also be the second biggest year for natural gas pipeline construction in the last two decades after 2008 and that spells good news for Indian pipeline manufacturers who can encash on low capital cost, cheaper domestic steel prices (accounting for 65-70% of total order), low manual cost and coastal manufacturing facilities which reduces the transport cost over land.

In this industry, consumers are in the West and manufacturing capacities are in the East. In the middle of the global slowdown, Western countries like the USA emphasised the need to replace their old pipelines and placed large orders during 2008. More than 70,000 km pipeline in the US is due to be changed by 2014 because these are more than 35-40 years old. For the US, Indian manufactures can offer low cost quality options. Latin America also needs a replacement for 34,000 km and Europe needs replacement of 46,000 km of pipeline.

Welspun Gujarat with annual turnover growth of 43% to Rs5,739 crore in 2008-09 has its manufacturing plant in Anjar in Gujarat. It also has a manufacturing plant in Arkansas, USA. Its manufacturing capacity has already increased to 1.5 million tonnes and is further likely to increase to 1.8 miilion tonnes by March 2010, making it the largest of its kind in the world. PSL with an annual turnover growth of 57% to Rs3,549 crore in 2008-09 also invested in PSL North America LLC, USA which set up its manufacturing plant in Mississippi, USA. PSL secured a leased land of 155 acres for 99 years at the annual rent of $1 in Mississippi. It is likely to start production in the new unit. The company has one million tonne of production capacity. Jindal Saw with higher contribution from domestic market makes an annual turnover of Rs5,161 crore and has a manufacturing plant with a capacity of over 1.5 million tonnes. It has a plant in Mundra in Gujarat. Man Industries with an annual turnover of Rs1,883 crore in 2008-09 has an order book of over Rs2,000 crore. It has one million tonne plant in Anjar in Gujarat. 
Dhruv Rathi  [email protected]

 


-- Sucheta Dalal



 



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