Lanka Special Steels strikes while the iron is hot

* Riding the wave ever since E. B. Creasy acquired TATA Steel

* Penetrating the lucrative South Indian market

* New manufacturing facility worth Rs. 1.3 bn to deal with production capacity challenges

* Company working on direct exports to Canada, South Africa and the Middle East

By Sanath Nanayakkare

Lanka Special Steels Limited (LSSL), the leading GI wire manufacturer in Sri Lanka has been strengthening its position in the export market since it was acquired by E. B. Creasy & Co. PLC from TATA Steel in 2015. Today the company is leveraging its success on five pillars. They are namely; its strategic capacity add-ons, its knowhow gained from India’s TATA Steel, sourcing of best raw materials, use of world-class European machinery and feeling the pulse of the South Indian market which creates significant effects of transactions on the company’s balance sheet.

These facts were revealed to the media by Pravin De Silva, Director – Chief Executive Officer- LSSL after the Company which was earlier known as TATA Steel, unveiled its new state-of-the-art manufacturing facility at Lanka Industrial Estate (LINDEL), in Sapugaskanda on Monday.

“We have established relationships with Hindustan Zinc, TATA Steel, JSW Steel, and other internationally reputed suppliers for raw materials. So LSSL guarantees the use of high-quality inputs resulting in superior finished products of unparalleled quality. For example, our hot dipped Gi wire is the only one with SLS 139:2003, and our barbed wire possesses the SLS 31:1988 certification as the only barbed wire in the market with SLS certification. So we are successfully exporting to the U.S.A. Canada, India and many other countries. Lanka SSL has obtained Bureau of Indian standard certificate of IS 280 for galvanized steel wire in order to supply to Indian market. South India is a good market for us. There are two reasons for this. One thing is South India is freight-friendly. And the other thing is most of the GI wire producers in India are located in North India – about 1000 kms from South India. But the distance between Sri Lanka and South India is less than 100 kms. This is a great advantage for us to penetrate into South Indian market. As a former TATA company we have all the knowhow and we understand the requirements of South Indian customers and already a sizable business comes from South India” Pravin De Silva said.

“As the domestic market is going through a tough time, we are planning to export 70% of our products and sell the balance 30% in the domestic market. Earlier we were selling about 90% of our products in the domestic market. Now we see that there is enough scope for exporting our products. However, in catering to the export market, we saw that our production capacity was a bottleneck. So we had to address that issue and that’s why we set up a new plant in Sapugaskanda with an investment of Rs. 1.3 billion,” he said.

“Currently we are exporting to the U.S.A. indirectly. I mean, we export to the U.S.A through Trinity Steel. Trinity is exporting hard wire nails and we supply them with 75% of their GI wire requirement. They produce about 1,000-1,500 metric tons a month. We supply GI wire to them and they export the end-product. Earlier they were importing 100% of their GI wire requirement and we were able to stop that foreign currency outflow. increase its production capacity from 15,000 MT to 30,000 MT per annum

“If we produce at the full capacity of 30,000 per annum – that will come to about USD 50 million foreign currency savings per year. With the capacity add-on, we are planning direct exports to Canada, South Africa and the Middle East. We are now working on to capture these markets. There’s a good demand for the end-product in countries such as Canada. That’s not for GI wire but for the end-product such as wire nails, hangers etc. Currently we are manufacturing an L-shaped article for Canada now which we export one or two containers every month. Our domestic value addition to the products is about 30%-35%,” he said.

He said that with the appreciation of the rupee, the company’s profit margin has reduced but at the end of the day what is important for the company is volume and that’s why they are trying to increase production volume to ensure a healthy balance sheet.

He noted that the Free Trade Agreement with India helps LSSL to enter the Indian market with a 5% duty benefit.

Further speaking he said: “In 2020, the domestic demand was about 13,000-16,000 tons out of which we supplied 75%-80%. Now the demand has gone down. We realized that with our capabilities, knowledge and experience we could easily reach the export market. When exporting we can’t be an on and off supplier. We had to be a serious player. Now we have everything in place to be a serious player in the export market.”

He concluded by saying that investing in a down market makes sense when you can reap its benefits in a turnaround.”

Arudpragasam, Chairman of E.B. Creasy Group said that the new plant can break even at 15-20% of its production capacity.