Steel prices raised on the quiet

A day after Minister for Steel, Chemicals and Fertiliser Ram Vilas Paswan told Parliament that steel prices would come down by Rs 500 a tonne on account of the 2 percentage point reduction in Cenvat, makers of flat and long products quietly raised prices by Rs 1,500 to Rs 3,000 a tonne on March 4.

Producers have raised prices by Rs 1,500 to Rs 3,000 a tonne for long products, which are used in the construction industry. For flat products, which go into consumer durables and automobiles, the increase is Rs 2,500 to Rs 3,000 a tonne.

The price increase kicks in with immediate effect and has been implemented by both public and private sector producers.

However, apart from Tata Steel, the world's sixth largest steel producer, and cold-rolled and galvanised steel maker Uttam Galva Steels, no producer is officially acknowledging the price rise.

"We were waiting for the meeting with the steel minister. Even though the agenda for the meeting was review of projects, we were expecting some directive on prices," said an industry source.

Paswan, however, told an Assocham meeting in Mumbai yesterday that his ministry would not intervene in pricing decisions owing to the strong criticism it has attracted on this account.

He, however, qualified the statement by saying that non-interference would hold if steel producers did not raise prices at a higher rate than the rise in input costs.

With this increase, the ruling price of TMT bars, a widely-used long product segment, now stands at Rs 43,000 a tonne and that of hot rolled coil (HRC) in flat products around Rs 42,000 a tonne.

Yesterday's price rise comes a month after steel producers partially rolled back prices in February at Paswan's behest. Prices had been raised by Rs 600 to Rs 900 a tonne in January and again by an average of Rs 2,500 a tonne in February on account of steep increases in raw material costs such as coking coal and iron ore.

Producers were made to roll back prices by Rs 500 a tonne for TMT bars and rounds and Rs 1,000 a tonne for other products.

Costs between April 2007 and January 2008 had increased by Rs 6,000 to Rs 7,000 per tonne. Government-owned NMDC Ltd, the main domestic supplier of iron ore, raised prices 48 per cent in October and another increase of at least 65 per cent is expected in April, in line with the international iron ore prices.

Most steel producers without captive mines source their iron ore from NMDC.

Spot coking coal prices between April and February have almost doubled and international companies are looking at a 40 to 50 per cent increase in prices from April 2008.

Among the public sector steel producers, Steel Authority of India Ltd is covered 35 per cent for coking coal and 100 per cent for iron ore through captive sources.

Rashtriya Ispat Nigam Ltd (RINL), the other public sector producer, has no captive resources.

Among the major private producers, Tata Steel with Corus has 20 per cent iron ore security and 15 per cent in coal, JSW Steel has 30 per cent iron ore security and imports 100 per cent of its coking coal.

Essar Steel's only captive raw material source is its 1.4 billion tonne reserves via its acquisition of Minnesota Steel, which is yet to be commercially developed. Ispat Industries has no captive mines.