Dual price of steel okayed

In a shot in the arm for steel producers, the government has cleared a proposal for dual pricing, wherein steel used by re-rollers for export purposes would now be priced at the international level. The steel used for domestic purposes would continue to be priced at the present levels.

The cold-rolled (CR) manufacturers, who are exporting nearly 70 per cent of the production, would be hit hard. Till now, they were buying hot-rolled (HR) coil at domestic prices and selling the same at much higher prices in the international market.

Last week, the steel ministry had convened a meeting of steel producers, including Essar, Jindal, Ispat and CR manufacturers. It had said that "pricing is a bilateral issue between the companies and hence the government would not intervene."

From now on, the differential prices would be followed by the HR coil producers, industry sources said. They pointed out that this would help them improve their bottomline.

According to HR manufacturers, the integrated steel producers have held the domestic steel prices since March 2004 to ensure that the interests of the domestic consumers were taken care of.

Currently, steel prices in the domestic market are much lower than the international prices. Current domestic price of HR coil is around $570 per tonne against the $800 in many countries.

In 2001, standalone re-rollers had put pressure on integrated players to adopt an export-based pricing mechanism to convey the point that their profitability was getting hit due to the price difference between domestic and international markets.