Steel prices to go up by Rs 1,200-1,500 a tonne

It has been extremely necessary to raise steel prices due to a sharp decline in the rupee consequent to a proportionate jump in input cost: Essar Steel

Steel producers are looking to raise their product prices by Rs 1200-1500 a tonne for September to offset the loss being incurred currently due to drastic depreciation in the rupee.
 

Confirming the development, Shivram Krishnan, Chief Commercial Officer, Essar Steel, said, “We have no choice but to increase prices for September due to increase in the cost of production.”
 

While coal price has jumped marginally by 9% to $137 – 138 a tonne now from the level of around $125 a tonne in the beginning of this year, iron ore has shot up by $15 to $145 a tonne in the same period. Most importantly the rupee has depreciated by around 19% since January.
 

“It has been extremely necessary to raise steel prices due to a sharp decline in the rupee consequent to a proportionate jump in input cost. Steel should be costlier between Rs 1,200-1,500 a tonne effective September 1,” said Essar Steel spokesperson.
 

A report by OreTeam, a Noida-based research firm, said that the upcoming month could see JSW Steel, Essar Steel, Bhushan Steel, JSPL and Kalyani Steel increasing prices by around Rs 1,000 to Rs 1,500 per ton from September 1, mainly to pass on higher input costs. 
 

“Indian steel mills are preparing to hike their prices in the coming month on the back of rising imported raw material costs as rupee slips down to 65 against the dollar. Coal which is the prime raw material being imported by the major steel makers within the country is adding to the input costs on the back of sliding rupee but mutually agreeable decline in the coal prices globally may set the tone at par for the importers,” the report said.
 

Leaving apart the coal, the fuel costs have moved up within the country and to mitigate the impact on margins, the steel companies are left with no other choice but to increase their prices from next month.
 

On one hand the steel companies have no option but to hike their prices to keep their margins intact but on the other hand the sustainability of the hiked levels due to the slow steel demand is still keeping the steel makers deciding on their exact levels of increase.
 

The situation is critical for the steel mills as they have to find an equilibrium point to position their hikes else it could drastically impact their sales going ahead. Steel importers are not bringing in material at this point due to the depreciating currency giving the Indian steel mills an opportunity to fill in the gaps.
 

Meanwhile, domestic saria (TMT) manufacturers from south and north are also preparing to hike their prices by Rs 500-800 per ton from September as they feel the festive demand might support their hikes and give them an opportunity to recreate sustainable margins amidst rising input costs. 
 

Recently, JSW Steel decided to hike its product prices by 4 - 6% from September 1. Steel maker is facing a stiff challenge of making steel from low grade ore or the ore being bought from the auctions at a premium. Operating just around 70 - 80 percent JSW Steel is definitely in a difficult position amidst a slowing steel demand within the country. 
 

Producers, however, are looking to raise prices cautiously due to poor demand from user sectors. Data compiled by the Joint Plant Committee, under the aegis of the Ministry of Steel showed India’s steel consumption growth at a meager 0.2% to 24.1 million tonnes as against 3.1% jump in production to 26.1 million tonnes between April – July period this year.