Rising iron ore e-auction prices in Karnataka have forced JSW Steel to go for yet another round of price revision by around 1-2% from next month.
This means the company will now hike the price of the end product between Rs 700 and Rs 1,000 per tonne with effect from February 1, exactly a month after it went for a similar hike on January 1.
With JSW Steel increasing the prices, other steel makers, too, are expected to follow suit although they did not confirm whether a similar revision will be done or not.
?We have decided that we will increase the price of products by an average of Rs 700 to Rs 1,000 per tonne from next month as between December and January our cost of production have increased by almost Rs 500 per tonne on account of a high iron ore price,? said Jayant Acharya, the company director for commercial and marketing operations.
Also, the price of iron ore in Orissa has also risen now since the state has allowed its miners to transport only 50% of its iron ore production from the state.
JSW sources around 5 million tonne of iron ore from Orissa and the rest from Karnataka out of its total requirement of close to 16 million tonne per annum (mtpa) for its flagship 10 mtpa steel plant at Vijaynagar in Karnataka.
Acharya said part of the increase in production cost is also due to slight increase in freight cost and depreciation of rupee between December and January.
?We have also seen that there is still a price difference between global steel prices and the domestic steel prices and hence there is an opportunity for a price hike,? he said.
In fact, while JSW is reeling under the burden of expensive iron ore, any increase in price by any of the top three four steel producers apart from JSW Steel such as SAIL , Tata Steel and Essar Steel usually leads to others following suit.
?We will take a call on January 31 during our price committee meeting,? said a senior SAIL official while Essar Steel said it usually follows industry trends.
Currently, the global composite carbon steel price ? flat and long carbon steel average values for the regions of North America, European Union and Asia ? stands at $700 per tonne while the price of steel produced in the United States is at $675 per tonne or around Rs 43,700 per tonne and Rs 42,200 per tonne, respectively.
Against that, the current spot price in the benchmark Gobindgarh steel market in Punjab is at $534 per tonne or Rs 33,400 per tonne.
?A gap does exist in the international and Indian steel market but with Chinese imports finding its way into the United States due to its lesser cost, the global steel prices will definitely come down within three months,? said a prominent steel trader from Mumbai.
He is a regular buyer from all the major steel companies in India and did not wish to be named.
He said it will be difficult to sustain a price hike as the demand situation has still not improved and they dealer fraternity sees no signs of revival.
?Companies are still offering rebates and discounts on orders in the range of 5000 tonnes and more as sales are dipping. This price rise will be difficult to sustain,? he said.
According to details available from the monitoring committee (MC) ? entrusted by the apex court to conduct e-auction in Karnataka ? as a case in point, the price of ore fixed for 59% Fe grade for the e-auction on December 13 was at Rs 2,110 per tonne, the base price of NMDC.
This was in sharp contrast to Rs 3,100 per tonne and Rs 3,400 per tonne fixed for 56% and 58% Fe grade by private miners for the e-auction held on December 21 in Karnataka.
While private steel companies in Karnataka claim that this trend is prevalent across all grades of iron ore for all auctions, MC said the price variation is there only at some instances.
