Even as Prime Minister Manmohan Singh has asked steel producers to hold prices of steel for the first quarter of the current fiscal, the public sector steelmaker Steel Authority of India Ltd (SAIL) has hiked prices for long-term contracts, putting pressure on the spot market.

SAIL officials told FE that the company has already effected an increase of 5-8% in all categories of steel from the first week of June for long-term contracts and is contemplating another hike in July last week or beginning August.

After SAIL increased the prices of steel for future contracts, spot markets have already started quoting higher.

Officials of the Joint Plant Committee said that for 2mm hot-rolled coil, the Delhi spot market is quoting Rs 47,200 ?47,700 per tonne, up from Rs 46,000 per tonne, after prime minister asked steel makers to hold prices.

In Chennai, prices of 2mm hot rolled coil have gone up from Rs 47,840 to Rs 49,400 ? 50,000 per tonne. In Mumbai it has gone up from Rs 44,500 to Rs 44,750- 44,850 per tonne.

Prices of most steel products like cold rolled coils, pig iron, pencil ingots, wire rods, plates and others have been moving up in June after a period of stability in May. JPC officials said that after steel companies in April gave the government in writing that they would not increase prices during the first quarter of the current fiscal, the steel ministry had asked it to keep a watch over the day-to-day movement of prices.

However, certain private steel producers increased prices, for which the spot markets started quoting higher prices, JPC officials said.

Although the officials did not want to name the manufacturers who increased the price of steel, they confirmed that Ispat, Jindal and Essar were not among producers that increased the prices.

In March alone, steel prices were increased on three occasions, going up by an average Rs 5,500 per tonne across

all categories.

But after Prime Minister Manmohan Singh asked steel makers to contain prices, steel prices were brought down by an average of Rs 4000 per tonne and it remained stable for May.

During May, steel prices remained stable not because of market forces but because of the steps that the government took to contain inflation.

But now that the Union government has announced a 10% hike in the fuel prices and inflation has reached more than 11%, the whole purpose of trying to contain the steel prices has been defeated. While steel makers have been fighting the increasing input costs for the past two months, the burden of inflation is catching up with them.

SAIL officials said Chairman SK Roongta has made it clear that after July prices will be reviewed and it is bound to go up formidably.

But by how much it would go up, it is not possible say right now, officials said.

Officials of the government owned Rashtriya Ispat Nigam Ltd (RINL), which generally sets the price trend, said it has not increased prices for any contract, even although SAIL has done so despite having its own ore mines. RINL buys ore from National Mineral Development Corp.

Global steel prices continued its upward trend but Indian steel companies were forced to hold prices. While in the US prices have gone up for 12 consecutive months, and for hot rolled coils it is quoting $1100 per tonne, in Europe prices of hot rolled coils have increased for the sixth consecutive time to touch $ 1066- 1070. In China, hot rolled coils are currently quoted at $671- 675 a tonne, which has been a moderate increase for the period.