The country’s state-owned iron ore miner NMDC, which on Saturday hinted a rise of 34% to 56% in its base price, has left the non-integrated steel manufacturers in a state of fix. This is because the hike is termed as provisional, making it difficult for the players to forecast steel prices.
Moreover, steel manufacturers have hinted at a further price hike after NMDC comes out with a final price after agreeing to a contract with Japanese steel mills. NMDC had earlier raised its prices by 16% in January.
Ispat Industries director (finance) Anil Surekha told FE: ?NMDC has hiked its prices by 65-70% from its April 2009 prices. We have already hiked prices taking into consideration the rise in iron ore prices globally. However, we would decide on further hike after the final price announcement by NMDC.?
According to a recent IIFL report, steel producers would announce a price hike of Rs 4,000 per tonne in phases over the next two months.
There are fears among Indian steelmakers that the new price could increase by as much as 90% as Japanese steelmakers have accepted a price increase for the April-June quarter of 92%, to $106 a tonne. Analysts say, NMDC will try to raise prices by 90% but for the domestic players, it could be at a discount.
According to reports, currently, NMDC has raised prices of natural pellets by 56% to Rs 5,100 a tonne, but with an additional rise to come later, the increase is more likely to be in the order of around 75%. For iron ore fines, the price will increase 34% to Rs 2,600 a tonne, and for calibrated lump ore, the price will rise 46% to Rs 3,800 a tonne.
“We are in a state of fix due to this provisional price hike by NMDC. We are not able to ascertain the actual steel price,” said a steel manufacturer requesting anonymity.
NMDC supplies iron ore to India’s domestic steel producers that do not have their own captive iron ore supply like JSW Steel, Ispat Industries and Essar Ltd.
Indian steel makers have already hiked their prices by Rs 2,000-2,500 per tonne on Friday as iron ore and coking coal prices have risen sharply. Japan’s JFE has already agreed a coking coal deal for the April-June quarter of $200 a tonne, a rise of 55%.
Experts believe, margins of non-integrated steel players like JSW Steel, Ispat and Essar among other will be impacted as they may not be able to pass on the full increase. Steel contributes to 6% of the total inflation index and government may intervene if the hike in prices raises inflation.
Reacting to the price hike by primary steel manufacturers, secondary steel players have also hiked their steel prices. Uttam Galva on Monday announced that it has increased the prices of its products in the spot market and monthly contract by Rs 6,000 per tonne and is targeting an increase in quarterly contract prices by Rs 9,000 per tonne, again, with effect from April 1.