Hit by rising costs, steel companies may go for price hike in June

Companies planning to hike prices of flat steel prices by Rs 750-1,000 a tonne

A cost push might lead to a rise in prices of flat steel products next month, say companies in the sector.

“Iron ore prices are up by Rs 450 a tonne and coking coal by about 5 per cent over the last couple of months. There will be some impact on pricing,” said a primary steel producer. 

Mining companies raised ore prices by Rs 400-600 a tonne in February. Seaborne prices have been rallying due to a supply disruption in Brazil, a major producer. In the past two months, global iron ore prices have moved up by around $20 a tonne to $108 a tonne.

Coking coal cost for domestic blast furnaces in the fourth quarter of 2018-19 had seen increases of Rs 800 a tonne, compared to the earlier quarter, ratings agency Icra said in its April report. This had increased steel making cost by around Rs 630 a tonne.   

Jayant Acharya, director, commercial and marketing, at JSW Steel, said: “There is cost pressure due to increased prices of and already elevated coal prices. We are reviewing the situation.”

If an increase does happen, it would be the second one in this calendar year. In February, there was a rise of around Rs 500 a tonne. Though small, the hike had stemmed the downtrend in prices since since November.

“Prices fell in November, Dece­mber and January, with the total reduction in prices from November and January being Rs 5,500 a tonne. The first increase was in February and since then prices were rolled over,” said a producer.

A secondary producer, however, wondered if the market could absorb a price hike. The automobile and white goods sectors have been slowing.

"Automobile has been in the slow lane but this time of the year is typically so for the sector. The co­ated steel business is also a little off-demand during  the monsoon but the construction and infrastructure segments are steady. There are a lot of projects in the pipeline that are expected to take off, now that the elections are over," a producer said.  

Around 60 per cent of steel consumption is accounted for by the infrastructure and construction segments. The growth in steel consumption has therefore largely been supported by these segments, despite the slowing of automobile sales.