Jindal Stainless to Sell More Locally to Tide Over Strong Rupee

By Debarati Roy

Dec. 6 (Bloomberg) -- Jindal Stainless Ltd., India's biggest producer of the alloy, will sell more to domestic customers as a stronger rupee make exports less competitive.

The company plans to cut sales to nations including China and Taiwan to 30 percent of its production in two years from 50 percent, Managing Director Ratan Jindal said in an interview in New Delhi yesterday. Jindal makes 600,000 tons a year at present.

India's rupee is poised for the biggest annual advance this year against the dollar since at least 1974, hurting exporters. Jindal is seeking to benefit from domestic demand growing at a 12 percent clip and falling input costs to tide over a stronger currency. The price of nickel, the main raw material, has almost halved from its peak in May.

``We want to concentrate on the Indian market and also take advantage of falling costs because of the stronger rupee,'' said Jindal. ``Our dependence on China will more or less disappear.''

Nickel for immediate delivery may average between $27,000 a ton and $30,000 a ton next year, Jindal said. That compares with this year's average of $37,783 a ton. Nickel futures traded in London reached a record $51,800 a ton on May 9.

Jindal Stainless in October reported second-quarter profit more than halved as sales declined and raw material costs rose. Earnings in the quarter ending Dec. 31 may be little changed from 1.1 billion rupees posted a year-ago as some users defer orders amid expectations that falling nickel costs would drive down rates of stainless steel.

`Bad News'

South Korea's Hyundai Steel Co. has cut output of cold- rolled stainless steel several times in the past six months because some customers held back new orders. Rivals in China agreed in July to reduce supply by a fifth amid a local glut.

``The fall in nickel is bad news for us in the short term as customers hold back to watch if prices fall further,'' said Jindal. ``Profit in the current quarter as a result will be flat but we can expect it to improve next quarter onwards.''

Jindal Stainless shares fell 1.5 percent to 232.1 rupees at the 3:30 p.m. close on the Bombay Stock Exchange. The stock has almost doubled this year to a record. Hyundai Steel has surged 157 percent in the period, faster than the 57 percent gain in the 30-stock Bloomberg Asia Pacific Iron/Steel index.