Financial Times

Sri Lanka’s steel industry is in the throes of a major crisis as over 600 industries with more than 40,000 workers face imminent closure due to a shortage of raw material and uncontrolled export of raw material to India.

Already seven steel plants have shut down leaving 1,000 workers in the lurch, an issue that has been raised by the trade in a letter to the Board of Investment (BOI) blaming one particular Indian manufacturer for unethical trade practices.

A. Gaffar, Chairman of the Steel Industry Association told The Sunday Times FT that the ferrous steel industry is faced with constant fluctuation of selling prices and raw material prices because of a particular Indian steel plant situated at Madampe near Chilaw. “This plant is adopting unfair trading tactics and works on a scrap metal price of Rs.31000 per metric ton which is above market price. They have been maintaining such unrealistic prices resulting in the rest of the steel industry struggling to survive. That company is now selling their finished product at an unbelievingly low price of Rs.48, 000 per metric ton whereas our cost of production itself is above this level,” he said.

He said such a move will damage the other local industries and lead to a monopoly in the steel industry. “They are duping the public by manufacturing and marketing undersized and short length steel bars leaving room for buildings to collapse in the future,” he said.

He said Dr. Bandula Perera, Additional Director General, Board of Investment (BOI) was notified about the issue and urged the BOI and the Ministry of Industries to take immediate action against this factory in order to prevent further damage to industries. Dr. Perera told The Sunday Times FT he had received a complaint and was perusing it at present. Mr Gaffar said the ferrous and non-ferrous steel industry is confronted with scarce raw material at high prices. As a result of this T. W. Steel Lanka (a BOI factory), Seeduwa Steels, Indo Lanka Steels, Corolla Steels, Hiat Steels, Colombo Steels and Ispat Corporation (formerly known as Sterling and Walton Steels) have closed down and left over 1000 people jobless.

“They (India company) has recently set up another steel plant by the name of Confab Steels at Veyangoda, with a capacity of 9000 metric tons per month which is the total monthly demand for steel locally. They are adopting similar selling tactics in this plant by maintaining very low selling prices and destroying manufacturers,” he said.

Mr Gaffar said the authorities must take immediate steps to make available all the steel scrap in the Ceylon Government Railway (CGR), the Ceylon Petroleum Corporation (CPC), Sri Lanka Ports Authority (SLPA) and the Colombo Dockyard Ltd (CDL), to 100 percent locally owned steel industries at a concessionary rate to enable them to compete with BOI factories.

Melvin Samarasinghe, Chairman Foundry Development Services Institute said owing to uncontrolled raw material exports such as steel, cast iron, copper, brass and aluminium to India by traders and BOI companies many industries are facing closure.

This situation has arisen due to the FTA and the BOI signing agreements for the supply of raw materials to the Indian industry. “Governments always looked at short term export earnings without looking at the long term effects. Vendors use fraudulent ways to export valuable scrap material much less than the world market price by stealing local bridges and electrical wires and fittings which are available at no cost to them,” he said.

“The solution should be to ban export of all raw material of any form and India, Indonesia and Malaysia are practicing this. Also the BOI agreements should be cleanly monitored by authorities and customs and their license should be cancelled on violation,” he said.