The Union government will be meeting primary steel producers to seek an explanation on the rise in prices over the past few months.
The meeting, to be chaired by steel secretary D R Chaudhary, will be held on June 1. Primary producers have been told an explanation on rising prices will be sought.
However, steel companies are in no mood to give in. Producers ruled out any reduction in prices. “There is no scope for reducing prices,” they said.
Public sector iron ore producer, NMDC, also under the ministry of steel, increased prices by around 10 per cent recently. NMDC supplies iron ore to most of the major producers without captive blocks, like JSW Steel, Essar Steel, JSW Ispat and Rashtriya Ispat Nigam Ltd.
Since February, prices of flat steel used in the automobiles and white goods sectors were left unchanged while some adjustments were made in long products.
The benchmark for flat steel and hot-rolled coil (HRC) was quoted at Rs 36,200 a tonne in January and increased to Rs 36,800 a tonne in February. Rebars, the benchmark for long products, which was hovering around Rs 48,000 a tonne in January is now ruling at Rs 50,000 a tonne.
This is not the first time the government is intervening in steel pricing. In May 2008, with inflation ruling at around eight per cent, steel makers gave Prime Minister Manmohan Singh an undertaking that prices would not be raised for three months, following successive increases and some partial rollbacks at the behest of the minister. In 2009, too, the government had expressed its displeasure on rising prices, but it softened soon after, due to a demand-supply mismatch.
“We have been unable to cash in on the drop in input prices due to the depreciation in the rupee,” said producers.
Gains registered due to the fall in coking coal prices from $320 a tonne to $230 a tonne have been stemmed significantly with the rupee depreciation. Domestic mills are mainly dependent on imports for coking coal and coke.
“The import bill has gone up significantly owing to the sharp depreciation of the rupee vis-à-vis the dollar. If we consider annual coking coal imports of 35-40 million tonnes, the import bill will be higher by Rs 4,620-5,280 crore,” a primary flat steel producer said.
“Moreover, freight rates have also increased,” they said. Flat steel producers said the difference in the two benchmark products — HRC and rebars — is a reflection of the demand scenario in the two end-user sectors. The demand in the construction sector is marginally better, while auto sales slumped significantly last month.