Vizag Steel Plant products prices up

Price hike to bring in additional revenue of Rs 450-500 crore to VSP

The Visakhapatnam Steel Plant (VSP) has increased the prices of its products by Rs 1,500-2,000 per tonne from April 1. With the new price hike, VSP will earn an additional revenue of about Rs 450-500 crore during this fiscal.

As per the new price hike, VSP would now charge Rs 28,996 per tonne of 6 mm wire rods, Rs 29,308 per tonne of 100x50 mm channels, Rs 28,112 per tonne of 40 mm rounds and Rs 29,788 per tonne of 8 mm blooms.

VSP has increased the prices by Rs 1,800 per tonne on rounds, re-bars, wire rods and structural products, while the prices are hiked by Rs 1,500 per tonne on products like billets and blooms. The steel plant has increased the price of rails by Rs 5,000 per tonne.

"Our raw material costs increased abnormally. Besides, we have to pay an additional $70 on import of per tonne of coking coal this fiscal. Even other raw material costs have increased by 15-25 per cent as compared to last fiscal. So, the products' price hike is inevitable for us to run the plant," Y Siva Sagar Rao, chairman and managing director of VSP, told Business Standard.

Due to the increase in raw material prices, Vizag Steel Plant is likely to bear an additional burden of close to Rs 1,300 crore this fiscal. Of the expected Rs 1,200-1,300 crore additional burden, the coking coal imports alone are likely to account for nearly Rs 900 crore. Currently, VSP's coking coal requirement is around 30 lakh tonnes annually.

"At present, our products have a premium of around Rs 1,500-2,000 per tonne in the market. If the prices are not increased, the middlemen would enjoy this premium and get huge profit margins. On the contrary, the government would be benefiting from the price hike. Keeping these aspects in mind, we have increased the prices. If the markets do not absorb these prices, we may reduce the prices," Rao said.

The steel plant is contemplating hiking its products' prices by Rs 5,000 per tonne this year. Otherwise, the abnormal increase in raw material costs would show an adverse impact on the plant's bottomline, he added.

"Depending on the demand for VSP steel, local steel traders from now onwards will collect an additional Rs 200-500 per tonne on these products in the retail market," Krishna Rao, a leading steel trader in Visakhapatnam, said.

Visakhapatnam Steel Plant has registered a 30 per cent growth in sales turnover in the fiscal ended March 31, 2005. The plant achieved a turnover of Rs 8,180 crore in the last fiscal as compared to Rs 6,174 crore in the fiscal 2003-04.