Steel majors hold on to prices

Domestic hot-rolled steel producers have decided to continue with the current price of Rs 25,000 per tonne because of the "softening" of international prices following a slowdown in demand from China, the world's biggest consumer.

The five major hot-rolled coil producers, which form the Indian Steel Alliance, have also asked the government to restore the export benefits under the Duty Entitlement Passbook Scheme (DEPB).

The DEPB benefit was suspended by the government from March 27, 2004 to discourage exports as part of measures to control spiralling steel prices.

Steel Authority of India Ltd, Tata Iron and Steel Company, Essar Steel, Jindal Vijaynagar Steel Ltd and Ispat Industries had in March 2004 cut the prices of hot-rolled coils by Rs 2,000 per tonne to Rs 25,000 per tonne.

They had also assured the previous government to hold the prices till this month. The companies account 80 per cent of total flat steel production in the country.

JJ Irani, ISA chairman, said the domestic steel prices were influenced by international prices, which have softened in the last two months.

"We are no longer immune from international prices. I would be surprised if the international prices go up. Looking into the trends, it can be expected that the prices will come down," Irani told a news conference here.

He attributed the stability in prices to a slump in demand from China, which consumes 33 per cent of the world's steel output. Irani said the demand for steel in India would increase if the current investments in infrastructure continued to grow. India is one of the lowest consumers of steel at only 30 kg, against China's 120 kg and the world average of 140 kg.

He said the DEPB benefits should be restored to ensure that steel exports remain competitive in global markets. The current customs duty of 15 per cent and the excise duty of 8 per cent should also be maintained to provide a level-playing-field to domestic companies.

According to ISA President Moosa Raza, the steep rise in input costs like metcoke, melting scrap, pig iron, iron ore and freight have affected the production cost. He dismissed suggestions of the steel sector being a "profiteering" industry saying it had made profits in 2003-04 after five years of losses.

Raza cited the shortage of raw materials, high cost of capital, basic inputs and services like electricity and transportation, poor quality of infrastructure like roads and ports and various barriers on Indian steel exports by the developed nations as the impediments towards the growth of the industry.