Steel makers looking to raise prices by Rs 1,000/tonne nxt mth

They had previously hiked the price in Sept by up to Rs 2,500 per tonne

Steel makers are mulling to raise price by Rs 1,000 a tonne from the beginning of next month to counter the cost push arising out of costlier iron ore and higher freight charges.

The proposed hike is likely to take the price of hot rolled coil (HRC), the benchmark steel product, to Rs 38,500 a tonne from Rs 37,500 per tonne now, said an industry source, declining to be identified.

Steel makers had previously hiked the price in September by up to Rs 2,500 per tonne, but holding on to it since then despite the NMDC hiking iron ore price by Rs 100 a tonne and the Railways imposing peak session charge from October.

Subdued market conditions, due to poor demand from the end-use segments such as construction and white goods, also prevented them from jacking up the price. India's steel demand grew by just 0.4 per cent during April-November period of the current fiscal.

"Steel prices are set to go up again. This is primarily on account of increase in iron ore price and Railway freight increase. These together inflated the cost of steel production in the region of approximately Rs 700 per tonne," an official of a private steel maker said.

Barring Tata Steel and Steel Authority of India, domestic steel makers mainly source their iron ore requirements from NMDC. A further hike of Rs 200 a tonne in December by the state-owned iron ore producer has impacted private sector steel makers.

It generally takes 1.6 tonne iron ore to produce a tonne of steel.

The cost push went up further by around Rs 200 per tonne with the Railways imposing its annual busy season charge on freights from October, he said.

"Steel makers have been rolling over prices since October this year. It has now started to pinch their bottomlines. Hence steel prices are expected go up by around Rs 1,000 per tonne," he added.

Steel makers have also found a new reason to pass-on the inflated costs to consumers as their share of exports are on the rise leading to overcapacity situation in the domestic market evening out. The price at the international level too is inching up and now holding at the level of $650 a tonne.

"Indian steel mills continue to increase their share of exports and hence, the oversupply situation in the domestic market is getting evened out. We are not in a position to absorb the cost anymore. We are confident the increase in prices will get acceptance with the customers," a steel maker said.

Most of the leading domestic producers including SAIL, Essar Steel, Jindal Steel and Power and JSW Steel had raised prices in August and September expecting a revival in demand. Sharp increase in coking coal prices, on account of rupee depreciation, was also a major factor to effect hikes.