The Hindu Business Line : Steel costlier by Rs 5,000/t

It is mainly in anticipation of an increase in iron ore prices by National Mineral Development Corporation that the industry has raised prices. Apart from iron ore, there had been severe increases in coal and gas prices due to shortages.

Our Bureau

New Delhi, April 9 In a move that could further spur the inflationary trend, steel prices on Wednesday went up, with primary steel makers effecting a flat raw material surcharge of Rs 5,000 a tonne in prices of all grades of hot-rolled steel.

Along with the existing 14 per cent excise duty, this would lead to a net increase of Rs 5,700 a tonne to the end customer. The wholesale price of standard 2 mm hot-rolled coil in Mumbai would now stand at Rs 49,200 against Rs 43,500 on April 1 this year, according to data available with the Joint Plant Committee.

Essar Steel, Ispat Industries and JSW on Wednesday increased prices and the others are expected to do the same during the week, industry officials said.

Reacting to the sudden price hike, the Steel Minister, Mr Ram Vilas Paswan, said that the Ministry has sent its recommendations on controlling the prices to the Prime Minister’s Office and that he had also written to the Prime Minister.

Last option

Asked whether the Government would direct SAIL to hold prices of hot-rolled steel, the Minister said, “SAIL alone holding prices will not impact the market. Steel will be sold at the same price in the market and it would be the middlemen who will be benefited.”

The Minister also said that bringing steel under the purview of the Essential Commodities Act to control prices would be the last option for the Government. He said that the Ministry had recommended the removal of the existing 14 per cent countervailing duty on import of TMT bars and structurals and proposed a 15 per cent export tax on iron ore. Higher HR steel prices would lead to an increase in all downstream steel products.

The increase in steel prices came in less than a week after the manufacturers met Steel Ministry officials on the issue of rising steel prices and controlling inflation.

Industry sources said that it is mainly in anticipation of an increase in iron ore prices by National Mineral Development Corporation (NMDC) that the industry has increased prices.

The President of Indian Steel Association, Mr Moosa Raza, said that “NMDC has said that it would increase prices with effect from April 1. But the quantum of increase would be known only at the end of May after it completes its long-term negotiations with the Japanese buyers.”

The international negotiations that were completed in April were at 65-70 per cent higher rates. Once NMDC completes its deal with Japan, it would apply the same with Indian companies which will then have to pay the increased prices with retrospective effect, he said.

Input costs up

Justifying the price hike, officials in steel manufacturing companies said that apart from iron ore, there had been severe increases in coal and gas prices due to shortages.

For instance, among the three gas-based plants, the contracted amount for Essar, Ispat and Vikram Ispat are 3.11 million units, 1.3 million units and 0.8 million units respectively. However, this has been reduced to 0.70 million units for Essar and Ispat and to 0.45 for Vikram Ispat.

Non-availability of contracted gas from the Government is forcing gas-based steel companies to buy gas from the spot market at a premium of 300-400 per cent, industry officials said

In the case of coal, after increasing prices in January this year, Bharat Coking Coal Ltd (BCCL) on Wednesday said that it would cut supplies to SAIL and increase them for state-owned RINL unless SAIL agrees to a renegotiate a new price of Rs 6,300 per tonne for financial year 2008-09 as against Rs 4,500 it was currently paying.

The BCCL Chairman and Managing Director, Mr A. K. Paul, said, “At present SAIL is paying Rs 4,500 for a tonne of coking coal while the price of imported coal is around Rs 14,000. RINL wants supply of 50,000 tonne a month at Rs 6,300 a tonne,” he said.