As the pressure of rising raw material cost increases, steel manufacturers in India are expected to increase steel prices next month. According to a recent IIFL report, steel producers would announce a price hike of around Rs 4,000 per tonne in phases over the next two months.
Anil Surekha, director finance, Ispat Industries told FE, ?Raw material prices have increased by 50-60% so far, despite this we are finding it difficult to pass on the complete cost push to our consumers. Prices will increase, but gradually, taking into consideration the rising raw material prices.?
Steel prices in the last two weeks have surged in most global markets due to a rise in raw material cost. In the last two months, steel manufacturers in India have also hiked prices by Rs 2,500 – 3,000 per tonne on account of rise in international prices and passing on of increase in excise duty.
HRC prices in the domestic market are trading at Rs 37,250 per tonne against Rs 28,000 per tonne last year.
J Mehra, chief executive of Essar Steel reportedly said, ?The cost of iron ore has gone up by 40% at the beginning of this year and there may be a mid-term revision again and it may go up by another 40%. I believe this would cause an increase in the cost of production of steel to an extent-a minimum of $150 (Rs 6,840) per tonne.?
The current rise in steel prices is mainly due to rise in raw material price. Analyst reports suggest that iron ore prices are currently trading at 100 % premium to its 2009 contract rates. Coking coal contracts which are being negotiated are expected to be 20-25% higher over last year prices. During FY2010, long-term coking coal prices had been contracted at $128 per tonne. In March, BHP Billiton and Japan?s JFE Holding entered into a quarterly agreement in which Billiton would supply coking coal for three months at $ 200 per tonne, a 55% increase over the last year?s annual contract price of $128 per tonne.