Steelmakers look at price cuts

JSW Steel and Kalyani Steels are considering cutting some steel product prices to preserve market share, worried Chinese exports will become even cheaper due to a weaker yuan, company officials told Reuters.

India, the world's fourth largest steel producer, turned net steel importer in the year to March 31, as an oversupplied China flooded it with cheap metal, mainly for construction.

China's decision this week to devalue its currency has further worried Indian steel companies, most of whom operate on razor-thin margins.

A senior official at JSW, India's third largest steel company, said it might keep prices unchanged for its high-end products, which make up 37 per cent of its output, but that for the rest it might be difficult to hold to current rates.

R K Goyal, managing director of medium-sized producer Kalyani Steels, said it could scale down operations or further cut prices despite losing money.

"We will have to cut prices and bear losses," Goyal said. "It's very difficult to close steel plants entirely but we may have to shut some units."

The country's steel imports jumped 72 per cent in the financial year to end-March to 9.3 million tonnes (mt), with China accounting for about a third of the total. During the June quarter, steel imports from China rose 49 per cent from a year ago to 723,000 tonnes, according to government data.

Tata Steel has said the country is importing one mt of steel a month. Spokesman Chanakya Chaudhary declined to comment on Tata's pricing strategy but said there would be "mayhem" in the Indian market after the yuan devaluation.

The JSW official said though India's steel prices have fallen 20 per cent in the past one year, consumers still prefer to buy China's even cheaper imports. The official declined to be named.

India has already raised the import duty on some steel products to 12 per cent but companies say that's not enough to protect the local industry.

Ravi Uppal, managing director of Jindal Steel and Power, said his company had cut prices by as much as 25 per cent in the past one year and can't afford any more cuts.

"If the situation perpetuates, we will have no other option but to cut production.... We will continue to cut costs wherever we can, but the government has to protect us," Uppal said.