Steel companies mull 15% price hike

Two major steel producers Tata Steel and SAIL, however, have maintained their prices according to their commitment to the government.

But according to market sources, value-added products continued to remain out of the price control purview, resulting into frequent price hikes of products like blooms, power channels and other high-tensile steel products, which are import substitutes.

Although Sheshagiri Rao, the chief financial officer of JSW Steel, denied any move to increase prices this month, market sources said all steel producers, barring public sector Steel Authority of India (SAIL) and privately-owned Tata Steel, have raised prices by Rs 2,500-4,000 a tonne early this month.

"Although, global prices are increasing by leaps and bounds, we have not decided anything so far for August as the month is a fortnight away. We will wait and watch till the end of July and take a decision according to the market behaviour," said Rao. Global steel prices have doubled in the last one year, with the benchmark hot- rolled coil shooting up to $1,200 a tonne today in London compared with $600 a tonne around the same time last year.

"Domestic steel producers are caught between national and company interests as any further price hike would prove to be a compromise of the country's interest. But if prices are not revised upwards, companies' margins would be thinning down as input costs have surged dramatically," said S K Gupta, director, Jindal Steel.

"So far, no one has approached me on this issue. But I personally think there is a price gap of 15-20 per cent between global and domestic prices," Gupta added. Steel and raw materials constitute about 5 per cent in the Wholesale Price Index (WPI) of the inflation, but recent price hikes have resulted into over 12 per cent addition to the inflation, which is currently hovering above 11.50 per cent.

"Indian companies have suppressed the price to curb inflation. But it is quite difficult to keep it going under global pressure," said Anil Suraj, an analyst in Mandi Gobindgarh, the hub of physical steel and scrap market in India. Unlike earlier, steel companies have also started offering special discounts to large-quantity buyers, said a market source.

"Hot-rolled steel producers have raised prices this month, pressurising cold-rolled steel producers to follow suit. The former constitutes 70 per cent of the latter's production. Cold-rolled producers are already operating with very thin margins.

Therefore, the price rise is inevitable," said S C Mathur, head, Cold-Rolled Steel Manufacturers' Association. "We have to raise steel prices for our own survival as everything from crude oil to iron ore, coking coal and electricIty is mounting," said Nitin Johri, chief financial officer, Bhushan Steel.