After cutting prices of flat steel products by Rs 1,000 per tonne in the last two months, steel producers are now set to increase steel prices early next year. The extent of the price rise is yet to be decided but it could be in the region of Rs 1000-2,000 per tonne, say industry sources. Prices of flat products, which are used primarily in the automobile industry, are currently ruling at around Rs 32,000 to 35,000 per tonne.
Steel majors such as JSW Steel, Essar Steel and Ispat Industries believe there is scope to hike prices given the rising demand in the home market and signs of a recovery overseas markets. Vikram Amin, executive director (Sales & Marketing ), Essar Steel said, “With the demand for steel strengthening, pricing sentiments are turning positive.”
Public sector major SAIL has already said it may increase prices in January next year. SK Roongta, chairman, SAIL had indicated as much earlier this week. One reason why steel makers are keen to push through a price hike is because they are seeing an increase in raw material prices. Jayant Acharya, director, sales and marketing, JSW Steel, said prices of both coal and iron ore have gone up. When contracts are re-negotiatied early next year, these could be finalised at higher levels of anywhere between 10 and 25% over those in 2008-09, he added. “With prices of raw materials rising, steel makers will be compelled to increase prices of finished steel so as to be able to maintain their margins, he said.
Iron ore contract prices in 2008-2009 were sealed at $75 a tonne, while coking coal prices were sealed at around $300 per tonne. In the current year, long term coking coal prices have reduced to $128 per tonne and spot market prices are ruling slightly higher. Anil Surekha, executive director (finance), Ispat Industries Ltd said, “Steel prices have gone up internationally whereas the raw material prices have also increased, hence, prices are set to increase in January next year.” Prices of imported steel scrap have gone up from $290 to $340 a tonne in just one month between October and November.
According to industry sources in Asia, Japanese mills are planning to raise (hot rolled coils) HRC export prices by US$50 per tonne in the first quarter of 2010. Similarly, downstream mills in Korea and Japan are also raising 1QCY10 cold rolled coils (CRC)/galvanized prices by US$20-30/tonne. In fact, some price hikes have already been implemented by ArcelorMittal and ThyssenKrupp.
Steel makers in the home market say they have not been able to cash in on the growing demand from the automobile sector. That’s because prices international have been lower and over capacity of steel in China was forcing them to cut prices of flat products. . Tata Steel, recently said that its new automotive contracts for the second half of 2009-10 have been signed at prices that are higher than those for the preceding one year. Similarly an Essar Steel spokes person had earlier said, “The international prices of certain value added grades are firming up and Essar steel is looking at rolling over prices of certain grades.”
Industry players believe, the steel demand outside of China and India has still shown the downward trend and European and US markets have seen lower capacity utilisation recently. The European steel plants have been reducing production and capacity utilisation in view of lower demand.