The Hindu Business Line : Rising raw material costs may force steel producers to hike prices again

Mumbai, Dec. 7 Steel producers may be forced to hike steel prices in the next few months in the wake of the galloping costs of raw materials, including coal and iron ore. This was indicated by officials of steel companies and analysts during the two-day Seventh Asian Steel Conference that began here on Friday.

In October, steel makers hiked prices by Rs 400 to Rs 800 a tonne across various products.

“There will be a marginal increase in steel prices in the medium term. I cannot project the long-term impact. But, if raw material costs continue to rise like now, there has to be either more price increases or steel producers will have to cut production,” Dr. S.K. Gupta, Director, JSW Steel, said on the sidelines of the conference.

Pig iron prices, similarly, could rise by Rs 2,000-Rs 3,000 a tonne in the next three months from Rs 20,000 a tonne due to the increase in raw material costs, said an official of Sesa Goa. Mr Malay Sengupta, Chairman and Managing Director, Metal Scrap Trading Corporation, which sources and procures various input materials for the iron and steel industry, said, “In the last three years, prices of the raw material increased by 300 per cent.” The EBT margin of iron ore produces increased from a little over 20 per cent in 2003 to over 45 per cent in 2006. “One would normally expect, under these circumstances, a rush of investments in this sector. But it is not happening in India. Once the mining policy is cleared, one may expect a lot of investments to come in and price to stabilise,” Mr Sengupta feels.

Similarly, prices of coking coal increased from $220 a tonne in the beginning of the year to about $480 a tonne at present.

Why have iron ore prices gone up? “The main reasons for increase in Goa are impact of Rs 300 export duty, strengthening of the Rupee and closure of Goa’s long term players, which has knocked out four million tonnes.

“The gap has to be covered somewhere and so it had an upward effect on price,” feels Mr Sameer Salgaocar, Director, Salgaocar Mining Industries Ltd.

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