Maha Seamless sees flat demand for 6 mths

NEW DELHI - Maharashtra Seamless sees production and demand for its products little changed for at least six months as oil and gas firms go slow on exploration and prospecting projects, its finance chief said on Monday.

With the global economic slowdown coupled with crude oil's over $100 decline from a peak of $147 in July, oil and gas companies have slashed their capital expenditure budgets, ultimately hitting firms in ancillary industries.

"As far as new demand is concerned, because new projects are getting defered or cancelled because of finance availability, that is affecting in a direct manner demand for pipes," Anil Jain told Reuters in an interview.

Nearly three-quarters of revenues earned by India's top seamless pipe maker are from the replacement market, with the rest generated by services for new projects, Jain said.

Seamless pipes are used in energy exploration, while the firm's other product, electric resistance welded (ERW) pipes, are used in transportation.

The declining prices of pipes have also made customers hold back on purchases waiting for a further fall, Jain said. He estimated a 40 percent fall in prices, from their highs in August-Sepetember.

"Based on the current situation that is going on, we expect for at least six months this scenario to be like that," Jain said. "I don't foresee much growth. I would be happy maintaining production at current levels ... 250,000 tonnes."

Maharashra Seamless has an installed capacity to produce 350,000 metric tonnes of seamless pipes a year, and 200,000 metric tonnes of ERW pipes.

Among its customers are top energy explorer Oil and Natural Gas Corp, GAIL (India) Ltd, Indian Oil Corp and Hindstan Petroleum Corp.

Jain declined to provide a financial outlook for the year to March, or for next fiscal, but said the firm would maintain its profitability on a per-tonne basis in both pipe segments.

"There has been some marginal increase in demand, around 5 percent, for both seamless and ERW," Jain said for 2008/09.

The firm produced 244,467 metric tonnes of seamless pipes and 107,594 metric tonnes of ERW pipes in 2007/08.

Shares in Maharastra Seamless closed flat at 125 rupees in a market that was up 3 percent.