Uttam to raise steel prices by 20 per cent

Uttam Galva Steels, India's second-largest maker of galvanized and cold-rolled steel, plans to increase prices by more than 20 per cent next month to take advantage of soaring demand for homes, cars and home appliances.

Prices of cold-rolled coils will be raised as much as Rs 6,652 ($150) a tonne to about Rs 37,000 for long-term buyers, finance director Ankit Miglani said in an interview on Wednesday.

Galvanized steel will cost 4 per cent more at about Rs 52,000. The government's appeal to steelmakers this month to cut prices relates to basic products, he said in Mumbai.

Sales at the nation's biggest carmakers Maruti Udyog, Hyundai Motor and their local rivals are increasing as rising incomes make cars and home appliances more affordable.

India, Asia's fourth-largest economy, is expected to grow 9.2 per cent in the year to March 31, the most in almost two decades.

"Steel prices are likely to remain buoyant,'' said Sanjay Makhija, vice president at Fortune Financial Services, a brokerage in Mumbai. "The rollback was for generic products.''

Hot-rolled coils, an industry benchmark, are used to make cold-rolled steel, used along with zinc-galvanized sheets in car bodies and home appliances. Corrosion-resistant galvanized steel is also used in construction.

The ruling Congress party, which lost Assembly elections in two states in February as inflation eroded the spending power of the people, this month asked steelmakers to lower prices of hot-rolled coils by Rs 500 a tonne to Rs 27,000 a tonne. Some steelmakers including Tata Steel reduced the prices of bars by as much as Rs 700 a tonne.

Tata Steel Deputy Managing Director T K Mukherjee declined to comment on whether the company would raise prices next month. Shares of Mumbai-based Uttam Galva fell 1.3 per cent to Rs 30.1 at 2 pm on the Bombay Stock Exchange, extending the year-to-date loss to 3.5 per cent. The benchmark Sensitive index has shed 9 per cent of its value this year.

Uttam Galva, which increased its cold-rolled steel capacity to 1 million tonne, plans to double its capacity for galvanized steel to 800,000 tonne by June to meet demand from Bharat Heavy Electricals and Larsen & Toubro, Miglani said.

Galvanized steel accounts for 80 per cent of the company's revenue and cold-rolled steel brings in the rest. The company sells its products to automakers including Mahindra & Mahindra, Bajaj Auto and Tata Motors.

Hyundai Motor and Maruti Udyog led gains in the domestic car sales last month after demand for new models increased. Sales grew 47 per cent, the fastest monthly pace in three years, the Society of Indian Automobile Manufacturers said on March 9.

Uttam Galva plans to set up a $60 million plant in Ghana with the UK's Liberty Commodities to supply automobile and construction companies. Uttam will increase the investment to $100 million in four years because it plans to make Ghana as the export base for other African countries, Miglani said.

"We've been selling in Ghana for the past six years and this country gives us access to other land-locked countries in that region,'' he said.

Uttam Glava is also looking at acquiring companies overseas to gain access to mature markets, he said.