Mandi Gobindgarh’s 70% Gas Cut Is a Warning Shot for India’s Entire Secondary Steel Sector

India’s steel industry is splitting into two realities. At one end, multi-billion-dollar capacity expansion announcements signal long-term confidence. At the other, hundreds of MSME steel mills in Punjab can barely keep their furnaces lit. The gas supply crisis at Mandi Gobindgarh — India’s oldest and most concentrated secondary steel cluster — encapsulates this divergence with painful clarity.

Here is what is happening, why it matters beyond Punjab, and what steel industry leaders should be watching.

Mandi Gobindgarh: Ground Zero of the Gas Crisis

Mandi Gobindgarh, straddling the GT Road belt in Punjab’s Fatehgarh Sahib district, has been India’s secondary steel heartland for nearly a century. The cluster houses approximately 250 induction furnaces, around 160 functional rerolling mills, and over 200 scrap-cutting units. These aren’t artisanal operations — collectively, they serve roughly 20% of India’s secondary steel market, producing TMT bars, structural sections, flats, and rounds that go into construction projects across northern India.

Two years ago, the National Green Tribunal directed these mills to switch from coal-fired furnaces to piped natural gas. Around 160 units complied, investing significant capital in furnace conversion. That switch was meant to be a cleaner, more efficient future. Instead, it has become a dependency that the Hormuz crisis is now weaponising against them.

Since early March, PNG supply to the cluster has been slashed in stages. IRM Energy, the gas distributor serving the Mandi Gobindgarh industrial area, confirmed that approximately 20% reduction was implemented in line with Government of India directions issued on March 9. However, the ground reality reported by industry representatives is far more severe.

Vinod Vashisht, national president of the All India Steel Re-Rollers Association (AISRA), has stated that units were first directed to cut consumption to 50% of their Fixed Demand allocation. The additional 20% provision that some units previously enjoyed was then withdrawn entirely. The combined effect, according to AISRA, is an effective 70% reduction in usable gas supply for many mills. Units that were running continuous shifts are now reduced to a few hours of daily operation.

The Price Squeeze Compounds the Volume Cut

The supply cut alone would be disruptive. But it has arrived alongside a sharp price increase that is compressing margins from both sides.

PNG prices in the Mandi Gobindgarh cluster have risen by approximately ₹6 per standard cubic metre (SCM) effective March 10. On top of that, an additional surcharge of ₹5 per SCM has been levied, pushing the effective delivered gas rate to approximately ₹49.50 per SCM. For context, this represents a roughly 25–30% increase in fuel cost over pre-crisis levels.

For a rerolling mill consuming 3,000–5,000 SCM of gas per day, the price increase alone adds ₹33,000–55,000 per day in fuel costs — before accounting for the production loss from operating at 30% capacity. Many units are reporting that they cannot cover fixed costs at current gas availability and pricing.

AISRA has formally requested government intervention to permit temporary, regulated, environmentally compliant fuel switching — effectively asking to be allowed to use alternative fuels (such as coal or LPG) until gas supply stabilises. This request reflects the desperation of a sector that invested in gas conversion based on government direction and now finds itself stranded by a supply chain over which it has no control.

Why This Goes Beyond Punjab

The Mandi Gobindgarh crisis is not a local story. It is a structural preview of what happens when geopolitical disruption meets India’s energy import dependence, filtered through the country’s most vulnerable industrial segment.

India imports approximately 53% of its LNG requirements, with a substantial share coming from Gulf producers — particularly Qatar, which declared force majeure on gas contracts after its facilities were hit by Iranian drone strikes in the early days of the Hormuz crisis. The Government of India’s March 9 directive to curtail industrial gas consumption is a national-level rationing measure, not specific to Punjab. It reflects a conscious policy choice to preserve gas for priority sectors (fertiliser, city gas distribution for households) at the expense of industrial users.

This means Mandi Gobindgarh is the canary in the mine. If the Hormuz disruption persists for another 4–8 weeks — a scenario many geopolitical analysts consider plausible — similar gas curtailment could extend to DRI-based steel producers in Gujarat (which has a large gas-dependent steel cluster around Kutch and Bhavnagar), induction furnace operators across Rajasthan and Maharashtra, and any industrial unit that switched to gas as a primary fuel in the last three years under regulatory or NGT pressure.

The Argus steel desk has reported that AM/NS India (ArcelorMittal Nippon Steel) is at elevated risk because of its significant gas-based DRI operations. If gas curtailment reaches that scale, the impact moves from MSME disruption to a potential supply squeeze on mainstream steel products.

The Shipping Freeze Adds a Second Front

While domestic MSME producers struggle with gas, the international steel trade is experiencing its own paralysis.

Analysis from SMM (Shanghai Metals Market) confirms that ocean freight rates for steel shipments to the Middle East have surged to $50–60 per tonne, up from $20–30 in the pre-crisis period. But the headline rate understates the real problem. Shipowners are simply refusing to commit tonnage amid market instability. Vessels that would normally ply the Asia–Gulf route are either anchored, rerouted around Africa, or demanding freight premiums that make deals unworkable.

For Chinese steel exporters — who shipped over 10 million tonnes annually to the GCC region — the situation has been described by market sources as “there were offers but no market, making shipments difficult.” Orders exist on paper, but physical delivery has become nearly impossible through the Strait of Hormuz. Cargoes previously booked from China and other origins are being rerouted to Saudi Arabia’s west coast, primarily Jeddah port, which adds substantial inland transportation costs for east coast–based industrial consumers.

In this environment, Hadeed — the Saudi Iron and Steel Company, and the GCC’s only flat-rolled steel producer — announced an increase in its May-rolling HRC price to SAR 2,400 per tonne (approximately $640 per tonne delivered), up from SAR 2,310 per tonne previously. The announcement, made on March 15, reflects Hadeed’s pricing power as the sole domestic flat steel source in a region where imports have effectively frozen.

For Indian steel exporters, this creates a complex dynamic. Gulf demand for flat products is elevated because of the import vacuum, but delivering into that market requires navigating the same freight and insurance challenges. Those who can secure viable shipping (potentially through overland routes via the International North-South Transport Corridor, or through Oman’s ports outside the Strait) may find premium pricing. Those who cannot are watching a lucrative export market slip out of reach.

The Polarisation of Indian Steel

What emerges from these simultaneous developments is a picture of an industry polarising at unprecedented speed.

On one side, India’s largest integrated producers — Tata Steel, JSW Steel, SAIL, AM/NS India — have the scale, fuel diversity, and balance sheets to weather the crisis. Their blast furnace operations run on domestically sourced iron ore and imported coking coal (which, as we have previously analysed, flows primarily from Australia via routes unaffected by Hormuz). They are passing through cost increases via mill price hikes and maintaining profitability.

On the other side, the MSME secondary steel sector — which accounts for roughly 55–60% of India’s total crude steel capacity — faces an existential squeeze. These producers depend on gas or LPG for furnace operations, imported scrap (which has become expensive and unreliable), and electricity (which is rising with oil-correlated power costs). They have no pricing power to pass through costs to construction buyers already resistant to elevated TMT prices.

The gap between these two realities is widening with every week the Hormuz crisis continues.

What Industry Leaders Should Be Doing

For MSME operators and secondary producers: AISRA’s request for temporary fuel-switching flexibility is the right near-term move. If your operations are gas-dependent, engage with your state pollution control board and industry association now — before supply gets cut further. Model your breakeven at 30% gas allocation and at current gas prices. If the numbers don’t work, plan for temporary shutdowns rather than running at a loss.

For large integrated producers: The MSME supply squeeze creates an opportunity — but also a risk. If secondary producers curtail output significantly, domestic supply of TMT bars, structural sections, and wire rods tightens. This supports your pricing, but it also risks triggering government intervention (export restrictions, price caps) if construction cost inflation becomes politically sensitive. Manage your price hike cadence accordingly.

For procurement managers and buyers: Two-source your steel. If you’re buying TMT or structural from Mandi Gobindgarh or Gujarat-based secondary producers, have a backup from an integrated mill or an alternative region. Supply reliability is now as important as price. Build 2–3 weeks of buffer stock for critical project materials.

For policy watchers: The Hormuz crisis is stress-testing India’s industrial gas distribution infrastructure in ways that nobody planned for. The outcomes of this test — whether the government provides fuel-switching flexibility, whether gas allocation priorities are restructured, whether MSME producers receive targeted relief — will shape industrial energy policy for years to come.

Data in this article has been verified against The Tribune India (March 13, 2026), Argus Media (March 2026), Kallanish Steel (March 15, 2026), and SMM Shanghai Metals Market (March 2026). All figures are indicative and subject to rapid change given the evolving geopolitical situation.

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