Steel firms cautious on price cuts

But JSW Steel cuts prices by Rs 500-1,000 per tonne to compete with imports

Even as JSW Steel announced a cut in prices of flat and long steel products to compete with heavy imports, mainly from China, and cope with a slump in demand, other domestic producers kept watching demand-supply.

The reason for these to hold on to their present prices is the rise in input costs. For the past few months, steel makers have been facing cost pressures, particularly after the recent Budget announcement of a rise in the import duty on coking coal and higher iron-ore prices sold through e-auctions. With the ministry of railways imposing busy-season surcharge from October 1, the mills do not see merit in reducing prices immediately.

“There is no case for a cut in prices as of now. Already, our prices are in line with the market,” an Essar Steel spokesperson said.

Though the domestic market is flooded with low-quality, cheaper products, Tata Steel has seen fairly good sales during the first half of this financial year.

“We have done well in the first half of the financial year. Our sales have gone up 22 per cent and there was good demand from the automobile sector for flat-steel products. Markets are looking up and we expect good demand for even long products during the second half after Diwali,” Tata Steel sources said.

Steel Authority of India (SAIL) and Jindal Steel and Power Ltd are likely to hold on to their prices, sources said.

However, JSW Steel, announced Rs 500-750 per tonne reduction in their flat products and Rs 1,000 per tonne for their long products for October. This is the second price cut in long products announced by the company in a month.

Flat-steel products are widely used in the automobile and consumer durable goods sectors. Long products are mainly used in the construction and infrastructure sectors, witnessing sluggish demand.

“We have been witnessing an increase in cheap imports. TMT bars are imported in the guise of alloy bars from China. The imported products are cheaper by at least Rs 5,000-6,000 per tonne. The volatility in currency, which has depreciated by 1.6 per cent in a month has caused lot of difficulty for makers,” Jayant Acharya, director, commercial and marketing, JSW Steel, said.

“Between April and August, the country imported 3.2 million tonnes, a growth of 23 per cent over a year ago. In August, imports were 870,000 tonnes. For the first half of the current financial year, imports are likely to be four million tonnes.”

Compared to exports of 2.5 million tonnes during the first five months of the current fiscal, the country has emerged net importer of steel products during the period, Acharya said.

The Chinese steel mills have reduced their prices of HR Coils to $440 per tonne compared to $600 per tonne in February and March this year. Compared to these prices, Indian steel makers are selling their products in the range of $600 per tonne.

“With this kind of price incentive offered by Chinese mills it is very difficult for the domestic steel mills to compete. Domestic steel producers, which are using only local iron ore, are unlikely to cut the prices as the prices of key raw material are still very high compared to spot market prices,” Prakash Duvvuri, Head of Research, OreTeam Research, a Delhi-based iron ore research firm said.