Steel firms buckle under pressure, revoke hike

Under intense pressure from the government, steel companies today decided to roll back the price hike announced from March 1.

The rollback, which came after quick rounds of meetings over the weekend with steel ministry officials in Delhi, is 100 per cent in case of mass consumption products like TMT bars and corrugated galvanised products and 50 per cent in case of hot rolled coils (HRC).

This means that prices of TMT bars and corrugated products have been brought back to the February level. HRC prices will be Rs 350-600 a tonne higher than the pre-Budget levels.

The ruling price of HRC is around Rs 26,000 a tonne, that of TMT bars nearly Rs 23,000 a tonne and of corrugated galvanised products, Rs 36,000 a tonne.

R S Pandey, steel secretary, confirmed the rollback and said it was done voluntarily by the companies after the steel ministry brought to their notice the government's concern over inflation.

Steel Authority of India Ltd (SAIL), Tata Steel, Ispat Industries, and Essar Steel had hiked hot rolled coil prices by Rs 700-1,500 per tonne from March 1.

SAIL had increased prices of all flat products by Rs 700-1,000 per tonne. Tata Steel had increased spot prices of HRC by Rs 1,000 per tonne, while Ispat Industries increased HRC prices by Rs 1,000-1,500 a tonne. Essar Industries raised prices by Rs 1,000-1,200 a tonne.

In long products, Rashtriya Ispat Nigam Ltd (RIRL) had hiked prices by Rs 300-500 per tonne, while SAIL had increased them by Rs 500 a tonne.

The varying extent of the rollback was due to the diverse nature of the end-customers. TMT bars and galvanised steel are used mostly by common people and hence the rollback in their case would be complete.

Pandey did not give a timeframe for the freeze on prices, but said they would be reviewed periodically and that a price monitoring committee had been activated.

Analysts, however, were not sure whether the government's intervention would be able to keep steel prices under control.

"Steel prices are likely to hit a life-time high this year with major countries like Russia turning importers and China curbing exports. A shortage is anticipated on the supply side. Steel is no longer a local commodity. It's difficult to keep steel prices immune to global trends," said a steel analyst with a local brokerage.

Offer prices from East Asia mills were at $550-570 FOB and indicative offers from China suggest a price of $580 per tonne for HRC. Sources said prices were rising everywhere.

Steel prices increased two to three times in 2006 and then started sliding in August, with the first cut being initiated in September. In the last quarter, prices were stable and the first increase of Rs 500 per tonne came about in February 2007.

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Cement firms not to budge

Cement makers have turned down the government's call to roll back the price hikes announced a day after the Budget, saying they were not in a position to absorb an increase in taxes.

The cement industry has informed the department of industrial policy and promotion in this connection. Earlier in the day, Finance Minister P Chidambaram had said that while the government was not resorting to price control, it had to take effective steps to moderate prices.

The Budget proposed to reduce the excise on cement by Rs 50 from Rs 400 per tonne if it is sold at Rs 190 per 50 kg bag, but raise it by Rs 200 per tonne to Rs 600 per tonne if sold at higher prices.

The industry promptly passed on the entire increase to the customers the following day by raising the retail price by Rs 12 per bag.

In the meeting with the cement industry today, Dua broached the possibility of manufacturers cutting prices, but received no positive response.