With a 4-5 per cent rise in steel prices on January 1, cars and consumer durables are set to get dearer.
State-owned Steel Authority of India (SAIL) has raised prices by Rs1,000 per tonne on flat steel (used in white goods and auto) and Rs1,200 per tonne on long steel (used in infrastructure and construction).
Private players were not behind in the race to increase prices. An official from JSW Steel said the company had raised prices by 4-5 per cent across its range of steel products. Ankit Miglani, director (commercial), Uttam Galva, too, confirmed the price rise his firm had taken. “We have raised prices by Rs2,500-3,000 per tonne,” he said.
Delhi-based auto and consumer durables steelmaker, Bhushan Steel’s director (finance) Nittin Johari said the company had followed peers and raised prices by Rs1,500 per tonne.
An analyst with a domestic brokerage said, “Due to input cost pressures, steel prices internationally have gone up and it was about time that Indian counterparts followed suit.” Even after the price rise, the analyst said, Indian prices are at a discount to international peers. “India might see another round of price rise in steel,” he said.
Steelmakers, meanwhile, blame the increase in coking coal and iron ore prices for the surge in steel prices. An industry official said, “Coking coal prices for the current quarter have gone up by 8 per cent to $225 per tonne and is expected to touch $250 per tonne in the next few quarters.”
A steel industry expert points out that auto and white goods demand in India continues to be strong and this price rise can be easily passed on to consumers. In the month of December, for instance, Tata Motors, the largest vehicle maker in India, posted an overall growth (including exports) of 31 per cent in sales, at 67,441 units as against 51,627 units in the corresponding period a year ago. Meanwhile, utility and sedan maker Mahindra & Mahindra (M&M) posted an increase of 27 per cent at 15,601 units in December as against 12,212 units a year ago.
The story is no different with white goods makers. For the calendar year 2010, for instance, the consumer durables industry grew at a clip of about 12 per cent, which is slated to cross 15 per cent in the current year, according to the Consumer Electronics and Appliances Manufacturers Association (CEAMA).
Arun Malhotra, senior V-P (sales and customer care), Mahindra & Mahindra said, “We will increase the price across our range of passenger and commercial vehicles shortly. The rise will be in the range of 0.5-1.5 per cent, which translates into a weighted average increase of 1 per cent. The hike is done mainly on account of high raw material prices.”
M&M is present in the passenger vehicle space with models such as Scorpio, Xylo, Bolero and Logan and also in the commercial vehicle space, with heavy and light trucks.
German car company Volkswagen has already increased the prices of its Polo hatchback by a minimum of 2.9 per cent. However, the quantum of hike is not uniform across variants could be higher on more expensive variants of the Polo.
Neeraj Garg, member of board and director, Volkswagen Passenger Cars, Volkswagen Group Sales India, said, “We have been faced with constant rise in input cost over the past several months and have tried our best to absorb it. In order to maintain our quality standards, we have had to increase the price by a small percentage.”
Tata Motors raised prices of some of its passenger vehicles, including the Indica, Indigo, Sumo Grande Safari and Xenon, in the range of Rs3,000-15,000. The company also raised commercial vehicles prices by Rs1,500-30,000 from January 1.
Maruti Suzuki, India’s largest car maker will increase the prices of its model later this week or next week. According to city-based dealers, the raise will be in the range of 1-3 per cent across all models. Maruti officials were not available for comment.
Hyundai, on the other hand, is all set to raise its prices by 1-2 per cent across its entire offering. The company’s dealers stated that the company has already intimated them about the raise, which would happen in the next two or three days. Korean chaebol LG is not indicating its pricing strategy yet even as rival Samsung has decided to take a 1.5-3 per cent hike in refrigerators, and a 1.5-2 per cent hike in semi-automatic washing machines with immediate effect. Air conditioning major Voltas will also take a 5 per cent hike this month, says the company's senior vice-president for unitary products, Pradeep Bakshi.
Executives at Videocon, Godrej, Sony and Panasonic couldn’t be reached for their comments. But Onida’s vice-president, sales and marketing, K Sriram said, he doesn’t see an impact yet of the steel price rise on products.
Samsung is also considering a price rise in air conditioners, but the quantum is being worked out.
After copper, a major constituent for most consumer durable makers, the next key component is steel, used to make metal cabinets, frames, compressors etc. So categories that are directly impacted due to a price rise include air conditioners, refrigerators, washing machines and micro-wave ovens.
In the last few months, most consumer durable majors have been raised prices, thanks to the upward movement in copper prices, which in the last one year has jumped from $3,500 per tonne to $9,300 per tonne on the London Metal Exchange (LME). The average price rise across categories has been about 2-5 per cent in the last few months, say industry sources.
In associates with Swaraj Baggonkar & Viveat Susan Pinto
