Steel firms hike prices by up to Rs 3,500 a tonne on input cost pressure

Analysts say coking coal prices more than tripled in the past five months to $390-400 a tonne in October

Steel companies have raised prices by Rs 2,000-Rs 3,500 a tonne this month on the back of input cost pressure.

After a reprieve between July and September, domestic steel prices started rising in October with an increase of Rs 1,200-1,500 a tonne in the first week for hot rolled coil (HRC), a benchmark for flat steel. Long steel prices rose by about Rs 3,000 a tonne.

Flat steel is typically used in automobiles and domestic appliances and long steel primarily for construction and railways.

Some of the major steel producers, however, indicated that there were two rounds of increase last month in flat steel.

“Since October and November, the increase in flat steel has been 6-7 per cent (around Rs 5,000 a tonne),” said a producer. For long steel, the increase since last month was Rs 6,000-6,500 a tonne.

The major reason for the increase is a surge in input cost. “Since April/May, the increase in input cost is about $250 a tonne. Most of the increase in steel price is led by input cost,” said Ranjan Dhar, chief marketing officer, ArcelorMittal Nippon Steel India (AMNS India).

Isha Chaudhary, director, Crisil Research, said, coking coal prices more than tripled in the past five months to $390-400 per tonne in October.

The risk of high power costs (due to thermal coal shortage) and strong ferroalloy (raw material for steel manufacturing) prices further added to the rising cost pressure, she said.

“We foresee coal prices to remain high in the next couple of months keeping steel prices high in the near term even as iron ore prices continue to correct in the domestic market,” Chaudhary added.

Steel prices had been surging since last year, particularly the second half. In June prices touched an all-time high with average HRC prices at Rs 69,550 a tonne.

“With the price hikes taken in October 2021 primarily owing to high coking coal costs, HRC prices average at Rs 68,350 per tonne. Long steel prices, however, are at its highest seen levels averaging at Rs 58,400 per tonne in October 2021 again primarily led by high input costs,” said Chaudhary.

Steel producers said that with the current round of increase, HRC prices were at Rs 70,000-71,000 a tonne. Rebar prices, a producer said, was at Rs 61,000 a tonne.

After the current increase, domestic prices were at par with Asian prices, said Dhar.

“But domestic prices are still at a discount of $200 to Europe and at a much higher discount to the US. We expect Asian prices to move up further in November and December due to cost factors,” he said.

Domestic demand, too, is expected to recover. From now on, recovery is expected across all steel end use segments, said Chaudhary.

Price Surge

• Steel companies increase prices by Rs 2,000-3,500 a tonne in November

• Companies facing cost inflation on account of coking coal, thermal coal, zinc, among others

• After October hike, average HRC prices was at Rs 68,350 per tonne, long steel at Rs 58,400 per tonne, according to Crisil Research