First, steel prices went up and nearly priced manufacturers and exporters of engineering goods out of export markets. Now, steel is not available even if these exporters are ready to pay more.
Engineering goods account for 20% India?s exports in value terms and are the largest by sector. In the first quarter, ended June 30, 2008, exports of engineering goods increased by 24% in dollar terms and 22% in rupee terms as prices were marked up, but volumes grew marginally.
The exporters, ranged under the banner of the Engineering Export Promotion Council, say that government-owned Steel Authority of India Ltd, the country?s largest steelmaker, has been unable to supply their requirements.
The EEPC?s chairman, Rakesh Shah, said the uptrend in steel prices had already made Indian engineering goods dearer by 35-40% in the international market. Now, it is becoming difficult for them to get the steel needed to meet export orders.
?All major steel producers including SAIL have been unable supply the required quantity of steel to the manufacturers and exporters of engineering goods,? Shah said.
Industrial grade steel is scarce even in the spot market, with traders demanding 10% more than the government barometer.
According to the joint plant committee (JPC), which has been asked by the government to monitor market prices, 2mm hot-rolled coils was quoted at Rs 44,886 per tonne in the Chennai spot market, Rs 45,198 per tonne in Mumbai, Rs 45,327 in Delhi and Rs 45,397 in Kolkata on July 15.
On July 4, the prices were Rs 44,677 in Chennai, 45,198 in Mumbai, 45,627 in Delhi, and 45,422 in Kolkata.
Shah said while the uptrend continues despite the government?s admonitions, the original spot prices are not matching with what the government agencies have been reporting.
A SAIL spokesperson pointed out that its supplies to the market had improved substantially?by 36% during April-June this year compared with the same period of the previous year. During the latest period, it supplied 1.11 million tonne.
SAIL said that even as it focused on maximising production of special steel and value-added items, its overall production during the first quarter ended June 30, 2008, has been the highest for any quarter in its history.
Production in the latest quarter was up 41% over the corresponding period last year, SAIL said.
Other steelmakers also said that all major producers have increased production but prices continue to rise.
Shah said that engineering goods manufacturers and exporters are baffled by the government?s announcement that traders should be eliminated from the steel supply chain to keep their margins out of the final pricing.
Does this mean that there would be no spot market and steel producers would have to change their distribution model, Shah has asked the government.
Apart from input pricing, engineering goods exporters are expecting bank export credit to go up by one percentage point as it is related to the prime lending rate.