Stainless steel set to get a lot dearer

Domestic stainless steel prices are set to increase by Rs 5,000-7,000 per tonne for low-end grades and Rs 12,000-15,000 per tonne for high-end products from January. This will be the steepest increase in stainless steel prices in the past eight years.

Industry sources said, the reasons behind the sharp increase were two-fold. There had been a sharp increase in cost of raw materials like nickel. Strong demand for the metal, and expectations of further rise in demand, was the second factor.

Nickel prices had increased from $12,000 per tonne to $15,000 per tonne over the last one month.

Export prices of stainless steel would also increase accordingly. The prices of high-end export products were expected to go up by Rs 14,000-15,000 per tonne, as high end products had higher nickel content.

On the demand front, projections suggested that the demand in China would continue to increase. Sources said, China consumed around 230 million tonne of steel, of which stainless steel was around 3.2 million tonne. The potential for further growth was huge.

China's own stainless steel production was 1.3 million tonne. New capacities there were not expected to come on stream before 2005-06.

Till the mid-1900's, USA and Japan were the two major stainless steel markets with a combined volume of 3.7 million tonne. In 2002, China alone consumed 3.2 million tonne.

Sources said, given the similarities in development of Japan and China, going forward, demand was expected to grow at a rate of 9-10 per cent per annum. Current projections showed that the demand estimated in China would increase to 12-12.5 million tonne by 2017.

India exported 2-3 lakh tonne of stainless steel last fiscal. The industry was eyeing 15 per cent export growth year-on-year for the next 3-4 years.

In the domestic market also, the stainless steel industry was expecting galloping growth. Indian Army was considering using stainless steel in its upcoming Project Primrose, which would build tens of thousands of dwelling units for army personnel.

The stainless steel industry was also lobbying to increase stainless steel usage in railways, metros and new airports.

The mood in the industry was reflected in the stock market, as well. The shares of Jindal Strips, the market leader, touched a 52-week high of Rs 486 on the Bombay Stock Exchange (BSE) before finally closing at Rs 479.65. On the National Stock Exchange (NSE), the scrip increased 1.6 per cent and closed at Rs 475.55.