The losses of the Steel Authority of India Limited (SAIL) and Essar Steel together overshadow the Rs 113 crore profit made by Tata Iron and Steel Company (Tisco) between April and December last year, to show a cumulative loss of Rs 1003 crore. The remaining three months of the fiscal are not likely to prove any better.

The three companies together contribute 60 per cent of the hot rolled (HR) steel made in the country, with SAIL leading the pack with a capacity of 2.7 million tonne. The HR inventory industry-wide is estimated to be more than three lakh tonne, even after the 75 per cent growth in sales last month.Steel companies are in the dumps worldwide because of the slump in steel consumption and a glut in production, but perhaps the HR producers are the worsthit. Hot rolled coils prices have dipped from a range of $330 a tonne to $340 a tonne prevailing in the world market between April to June 1997, to $175 a tonne (of CIS origin) at the end of last year.

The cold rolling mills (now up in arms against a so-called price advantage given to hot rollers,) will end the year with comfortable profits, if a little less than last year's. Industry sources hint that cold rolled had in fact, benefited more from the import price bands they have been campaigning against.

``The only people hurt by the (floor price) notifications are the traders,'' mused Lloyds Steel managing director, Rajesh Gupta. The DGFT introduced floor prices for seven steel items, banning imports below the stipulated rates.

The price band did hit imports, estimated to be lower this year than in the 1997-98 fiscal. Traders, who import steel and sell for a commission of a whopping $ 3 per tonne, have no reason to be happy with the floor prices. The most vociferous protests against the price bandshave come from cold rolled (CR) steel mills, however. The floor price of $ 302 a tonne (fixed on a three-monthly average of prices in Japan and Europe) was expected to boost domestic steel prices.

Hot rolled steel producers did increase prices by roughly Rs 1500 a tonne in January, only to roll back part of the hike last month, after cold rolling mills began to protest. Hot rolled coils and sheets are the key raw material of cold rolled (CR) coils and sheets, which in turn are the key input for galvanised (GP/GC) sheets and plates. Except for Essar Steel, all the other key HR steel-makers like Jindal Iron and Steel Company (Jisco) Ispat Industries and Lloyds Steel, also make cold rolled (CR) products and galvanised sheets and plates.

The conversion cost of HR steel to CR material is usually $ 80 a tonne worldwide, or Rs 4880 per tonne (not counting levies.) Consequently, prices of HR steel, CR products and GP/GC sheets and plates always move in tandem. The cold rolling mills, which have been rousingrabble against an apparent price advantage granted to the HR steel producers will end the year more comfortably. Cold rollers have also seen profits dip over the year, but not enough to see red.

The price differential between HR coils and GP/GC sheets (the end product) have reduced from Rs 12,710 a tonne in 1996-97 to Rs 9405 a tonne this year, but a margin there is. The HR producers have not been so lucky. As Sushim Bannerjee at SAIL's commercial directorate points out, the post-floor price HR coils prices were still lower than April 1997 rates. Incidentally, the rabble rousing cold rolling (CR) mills were also given the same element of protection, through a floor price. The CR steel floor price of $ 392 a tonne is $ 90 a tonne higher than the floor price for HR coils. Along with the five per cent duty reduction in HR coils, the import price differential between HR and CR steel becomes $ 167 a tonne, or Rs 7106 a tonne.

In January, SAIL, Tisco, Essar, Jindals and Lloyds Steel together sold 1.77 lakhtonne of HR coils, sheets, plates and skelps. The February sales of the industry were 75 per cent higher at 3.13 lakh tonne. ``Last month's sales look impressive because the January sales were bad,'' says Essar Steel advisor J. M. Bhasin. The total consumption of HR products in the country declined by 3.75 per cent between April last year and January this year. Sales were so bad throughout the year, that the steel industry in general and hot rolled coils producers in particular, decided to cut back on their production plans. The marginal production cuts and the sales drives (with freebies like discounts and credits thrown in) did not help wipe out inventories. The desperate sales promotions did bring down prices of steel drastically however. The low prices are primarily responsible for scraping at the bottomlines of HR producers.