Production cost for steel cos to go up

New Delhi, Mar 30 | Updated: Mar 31 2007, 05:47am hrs
From April 1, the production cost of the domestic steel companies will further go up by about Rs 400 per tonne as prices of key raw materials like iron ore, fines and pellets are slated to go up in the international market.

The development might impact domestic steel prices as companies are reeling under price margins as they absorb about Rs 1,700 per tonne.

Prices of iron ore would go up by 9%, fines by about 10% and pellet by 6%, putting an additional burden of Rs 150, 65 and 180 per tonne respectively. The increase comes at a time when prices of other inputs like coke, pig iron, and scrap have already gone up by Rs 400 per tonne each in the last three months.

The prices of these raw materials in the domestic market are governed by the prices in the international market.

Shanghai-based Baosteel Group in January 2007 had reached an agreement with Brazilian Companhia Vale do Rio Doce for a 9.5% increase in iron ore prices from April. Japan also reached a similar agreement with the Australian miners.

Steel companies have already indicated that they would raise prices from April 1.

Prices might go up as the industry would have to pass on the burden to the consumers. The increase in raw material cost would raise production cost by Rs 2,100 per tonne, said an industry insider.

The industry, which had raised prices after the Union Budget had later rolled it back on the request of the government to help in checking inflation. If the government wants no hike in the steel prices, it should ensure that the prices of raw material are also under control, the source added. The steel producers had partially rolled back price hike for hot rolled coil prices and fully on TMT bars and galvanised steel.

Price pressure on steel companies from April 1, 2007.