SAIL, JSPL raise steel prices following costlier coal

Other companies undecided as NMDC has cut iron ore prices for March

State-run Steel Authority of India Ltd (SAIL) and Naveen Jindal-led Jindal Steel and Power Ltd (JSPL) have hiked steel prices, citing a rise in coking coal prices internationally by up to $20 (around Rs 1,100) per tonne.

JSPL has hiked steel prices by Rs 1,000 per tonne, while SAIL, the country’s largest steel maker, has increased the prices by up to Rs 500 per tonne for March.

“The (price) correction was required, prices in international markets are rising. Coking coal prices have gone up by $15-20 per tonne (internationally) in recent times, other input costs have also increased,” SAIL Chairman C S Verma said.

The price rise comes at a time when the country’s largest iron ore miner, NMDC Ltd, has decided to cut prices of iron ore lump for March by 2.2 per cent. Other steel makers have not yet made up their minds on revising prices.

An Essar Steel Ltd spokesperson said the company hadn’t tinkered with prices this month, but the prices might vary depending on the freight rates. Railway Minister Pawan Kumar Bansal, in the Railway Budget presented in Parliament on February 26, proposed a raise in freight charges for the next financial year.   

JSPL defended the move, saying margins had been virtually absent and the prices of long steel products were low. JSW Steel Ltd did not reply to a query, but a company official said on condition of anonymity it had decided to raise prices.

A steel dealer based in Mumbai told Business Standard a few companies had raised rates in December, but had to roll it back 15 days later as demand did not sustain at the higher prices. The dealer also requested not to be named.

Ritesh Shah, lead analyst-metals and mining, Espirito Santo Securities, said: “Confluence of increase in coking coal contracts because of Queensland floods, depreciating rupee and iron ore scarcity are expected to keep steel prices steady in the near term.”

Even though JSPL meets its iron ore requirements from its own mines, it scouts the international markets for coking coal. Companies like Essar Steel and JSW Steel rely on third parties for their iron ore and coking coal needs. Therefore, the drop in iron ore rates from NMDC have come as a breather to companies like these, said another analyst tracking the sector.

Steel consumption in India has been dismal in the current financial year. According to the joint plant committee, a government body that tracks steel demand, supply and production, in April-January 2012-13, real consumption grew only 4.1 per cent. The total production of steel, in the same period, went up 4.4 per cent.

Apart from the subdued demand, steel makers are also reeling from a shortage of iron ore in the country. Many steel makers, such as JSW Steel, are importing iron ore for their subsidiaries. Essar Steel, too, is known to have imported certain quantities of iron ore.

The steel sector has been asking the government to allocate the necessary spending in the infrastructure sector, which would boost the steel demand. In the Union Budget of 2013-14, the government did announce a number of sops for the construction and infrastructure sector, which is likely to boost the demand for steel.