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Steel producers cut prices under pressure from cheaper import

While some producers have announced a cut in prices, others are offering discounts

Mahesh Kulkarni  |  Bengaluru 

Major steel producers have reduced prices of the finished product by three-four per cent for the month of January as metal prices across the world continued a downward trend. Domestic producers have announced price reduction of Rs 1,000 a tonne to Rs 1,500 a tonne for the month.

The move is aimed at countering cheaper imports from China and Russia and to arrest demand slump in the domestic market, industry sources said. While some producers have announced a cut in prices, others are offering discounts in different regions.

Steel Authority of India (SAIL), Rashtriya Ispat Nigam Ltd (RINL), and Jindal Steel and Power Limited have announced a reduction of Rs 1,000 to Rs 1,500 a tonne for long products, used in construction.

Rebar producers have announced a price cut between Rs 800 and Rs 1,500 a tonne, industry sources revealed.

RINL and SAIL are selling wire rod products at Rs 40,500 and Rs 39,000 a tonne, a reduction of three-four per cent over December. Wire rod products are mainly used in construction.

Tata Steel and JSW Steel have not yet announced a cut in prices but are offering discounts. They cannot afford to stay away from either reducing prices or offering discounts, analysts said. Nilachal Ispat has announced a discount of Rs 500 a tonne. Russian material is available at $470 a tonne on a CIF (cost, insurance and freight) basis, while Chinese material is imported at $475 a tonne. Domestic steel consumption showed marginal growth of 1.3 per cent during April-November, at 48.62 million tonnes, compared to 48 million tonnes in the corresponding period last year.

Whereas, import rose 49 per cent to 5.56 million tonnes during the period compared to 3.72 million tonnes earlier, according to Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel.

“The industry is overburdened in the country as it has to pay a very high level of logistics and freight costs to Indian Railways, of 17.5 per cent. In addition, we have to pay decongestion charges, imposed in November by the railways. Compared to China, we have a very high level of operational costs. As a result, Indian producers are no longer competitive,” Rao said.

Taking advantage of depreciation in rouble prices, Russian steel producers have increased shipments to India, analysts said. “The pressure will continue on prices. Overall, the prices will remain at the current level during the rest of the fourth quarter due to import pressure from china and russia,” said Ritesh Shah, lead analyst – India Materials, Espirito Santo Securities.

First Published: Wed, January 14 2015. 22:33 IST