Steel firms to hike qtrly contract prices after downward revision earlier

Tata Steel, JSW Steel, ArcelorMittal Nippon Steel India and other producers settling contracts

Steel companies are set to increase their quarterly automative contract prices after a downward revision July to September.

Tata Steel, JSW Steel, ArcelorMittal Nippon Steel India (AM/NS India) and other producers are settling contracts with original equipment manufacturers for October to December. Some companies have finalised contracts.

Quarterly contracts for October to December are due for an upward revision for the industrial and automobile sectors, said Jayant Acharya, joint managing director and chief executive officer of JSW Steel. “Some have been closed and the rest are in the process of closure.”

Ranjan Dhar, chief marketing officer of AM/NS India, said contract prices for the automotive segment will increase October to December on the basis of an agreed price settlement mechanism. “Last quarter, there was a big drop,” he pointed out.

Tata Steel contracts were getting settled and there would be an increase in Q3, sources said.

Tata Steel, JSW Steel, AM/NS India supply some 90 per cent of the steel automobile companies need. Typically, contract prices are based on the price movements of the previous quarter.

SteelMint data shows that the monthly average for hot rolled coil (HRC) was at Rs 55,500 a tonne ex-Mumbai in July. It was Rs 57,900 in September. The monthly average for cold rolled coil (CRC) was at Rs 59,388 a tonne in July and at Rs 62,478 a tonne in September.

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Automobile and ancillaries account for about 10-12 per cent of end-use consumption of steel. “We are seeing robust demand from the auto sector,” said Dhar.

“From a steel perspective, there is an increase in usage from the sector because of a structural shift in consumer preference to SUVs. The type of steel requirement has also changed in favour of high strength, more coated, etc,” he said.

Steel accounts for 8 per cent of the raw material cost for cars and utility vehicles, 7 per cent in two wheelers and 9 per cent in commercial vehicles. Some of the major auto companies have already announced an increase in prices effective January citing cost pressure and overall inflation.

Increasing raw material cost is also pinching the steel companies. “Raw material costs have increased for steel companies with both coking coal and iron ore prices at an elevated level. International prices have moved up partly reflecting the increase in raw materials,” said Acharya.

October-December contracts are based on steel prices in the previous quarter.