Severe winter has delayed production at Everest Kanto Cylinders' (EKC) planned cylinder production plant in China.
The plant would now be operational only towards the end of the year, said a senior company official. The plant was earlier scheduled to begin production by July. $quot;Due to winter, construction couldn't begin on time and now it would be safe to assume that the production would start only towards the last quarter of the calendar year,$quot; say sources from within the company.
EKC, India's largest industrial gas cylinder manufacturer, has a capacity to manufacture 700,000 cylinders annually. It is setting up a plant to cater to the local market in China with an initial annual capacity of 200,000 cylinders. The three-year project would need investments worth $75m. Eventually, it's output could reach up to 1.5 million cylinders each year.
The company also says it is in talks with some local seamless steel tube suppliers for sourcing, which is expected to bring down its cost. $quot;We have started buying from China. The quality is good but not very good. We have suggested some changes to the supplier, following which we can ramp up our orders. The cost is about 10-15 percent lower,$quot; said a company official.
Even if it procurers about 20 percent of cylinders from China, overall improvement on margin would be about 3-4 percent, since raw material accounts for about 60 percent of cost.