)
Faced with steep fluctuation in raw materials, steel producers have changed their strategy for fixing up selling prices of long products.
To begin with JSW Steel has adopted the practice. While other long steel producers like Steel Authority of India (SAIL), Rashtriya Ispat Nigam Ltd (RINL) and Tata Steel are currently holding on the earlier practices of announcing the price periodically.
"We are reviewing long products prices on daily basis. Market is so dynamic that we cannot review prices for once and keep quiet for a certain period. Depending upon market forces, we are changing prices on daily basis," said Sesharigi Rao, Joint Managing Director and Group Chief Financial Officer, JSW Steel.
Normally, public and private sector steel producers change their product prices periodically. Depending upon the volatility in raw material prices, steel producers review prices of their products both longs and flats, either on fortnightly or monthly basis.
The public sector SAIL, however, continues with its periodical price review system. "We have not changed any pricing strategy. Price change decision is specific company driven," said a SAIL official.
Data compiled by Delhi-based research firm OreTeam showed, ex-Vizag iron ore lumps at $42 a tonne. In international market, however, iron ore lumps are quoted at $47 a tonne, a decline of 34% since January. In the last one year, however, iron ore prices in the international markets have plunged by over 60% from the prevailing price level of $118 a tonne in global markets. Unfortunately, the public sector NMDC Ltd has been holding on iron ore prices high due to supply shortage in domestic market owing to mine closures.
In fact, NMDC has cut iron ore prices by almost 28% in the last one year. From the level of Rs 4500 a tonne in March 2014, prices of lumps have declined to Rs 3250 a tonne for March 2015. Similarly, fines selling prices are cut to Rs 2460 a tonne from Rs 2910 a tonne a year ago.
Attempts to reach Tata Steel and RINL did not yield any positive result. It is surprising that iron ore prices have fallen 22% this year in global markets but NMDC kept its price elevated.
"Steel producers in India are squeezed from both sides. While raw material prices remained elevated, steel prices kept falling over and above the ongoing weak demand in India. Apart from that, dumping from overseas has worsened our competitiveness even in domestic market. Unfortunately, owing to physical barriers, we are unable to import iron ore to the required quantity," said Rao.
India does not have adequate port handling facility of such a large quantity, say around 140 million tonnes of annual iron ore import over and above other raw materials including coking coal. Also, transporting iron ore from port to steel plant is another big problem for enhancing import quantity of iron ore, Rao added.
According to industry sources, steel import into India witnessed a sharp increase of 71% to set a new record at 9.31 million tonnes in 2014-15 as against a meagre 5.45 million tonnes in 2013-14. So, import is another threat for disallowing domestic producers to pass on the elevated raw material price to consumers.
Meanwhile, MS ingot prices moved up in Delhi by Rs 200 to close at Rs 29600 a tonne. Similarly, billet price jumped by Rs 200 to 26500 a tonne in Rourkela markets.
