PSL plans to double capacity at Sharjah unit

MUMBAI: PSL, one of the leading pipe makers of the country, will double its capacity at its just-commissioned plant in Sharjah to cater to the demand for pipes from the oil and gas and water distribution sectors. Till now, PSL has invested about Rs 65 crore in setting up the 75,000-tonne plant. The doubling of the capacity would need an investment of another Rs 40 crore, a senior executive said.

“Increasing capacity at Sharjah can happen either immediately or after a year. We are yet to decide,” said Ashok Punj, managing director of the company. The commissioning of the plant takes the company’s total capacity to 1.175 million tonnes.

The Mumbai-based company is also associated with a Rs 240-crore pipe mill project in the US, which is being implemented with its joint venture partner, the A&L Group. PSL holds 75% stake in the project, under which almost 3,00,000 tonne of capacity will be added. Shares of PSL rose 3.5% to Rs 265 on the BSE on Monday. The Sharjah unit is expected to improve costs for PSL, which may save it freight expenses. PSL exports almost 20% of its 1.1-million tonne production to West Asia. “While transport of steel gets a levy of $20 per tonne, for pipes it is almost $100 per tonne.

The Sharjah mill will make us competitive,” said Mr Punj. The Sharjah mill is capable of making offshore pipes. The company’s US-based plant, located on the Gulf Coast, follows the same strategy of meeting high demand in the region. PSL is also in talks with Chinese companies to set up a pipe mill in the country with a capacity of 3,00,000 tonne.

“We should commission the US plant by May 2008,” said Mr Punj. About 160 acres in Mississippi has been allocated for the project at a subsidised lease of $1 per year. The financial package for the deal also includes tax exemption of almost $15 million over four years and a 20-year tax-free bonds of up to $50 million.