TMT bar manufacturers, specially small and medium players, are looking forward to mark up prices, following increase in prices of iron ore because of restrictions on ore mining in Orissa. The restriction in mining have also put West Bengal’s 71 sponge iron units under pressure, which might lead some to close down units.
Shyam Steel Industries Ltd chairman SS Beriwala, running a 3 lakh tonne integrated steel plant at Durgapur told fe that the sponge iron units were running at losses to whose effect the integrated steel plants, which doesn’t have any captive iron ore source were also running at losses.
The rolling mills, he said, were currently running at a no profit ? no loss basis. But if some of the sponge iron units closed down, the rolling mills would also turn to losses.
According to S Bhattacharya, secretary of Sponge Iron Manufacturers Association, Bengal’s 71 sponge iron units owned by 51 companies have a capacity to produce 1 lakh 60,000 tonne of sponge iron per month consuming 3.5 lakh tonne of iron ore. But for short supply of iron ore from Orissa the 71 units together have not produced more than 50,000 tonne a month recently. This has put some steel units under pressure.
?In fact, the restriction in mining of iron ore should have put exports of iron ore under pressure, instead it has put small domestic steel makers under pressure,? Beriwala said.
Prices of iron ore, (ex- mines) have shot up from Rs 4,000 per tonne just two months back to Rs 6,050 per tonne at present. But prices of steel, mainly TMT bars, the mainstay of business for small steel plant owners, have not gone up in accordance with the prices of iron ore, Bhattacharya said.
According to Beriwala this has happened mainly because large players like SAIL, Tata Steel and Vizag Steel have not made any upward revision of TMT bar prices.
The companies having captive source get iron ore at a price ten time less than that of the price at which the companies not having any captive source get. Now while TMT bars from Tata and SAIL are sold at Rs 30- 31,000 per tonne, the same quality product has to be sold by other smaller manufacturers at a lower price. For smaller companies production cost are always higher and margins down the line are also lesser. So if bigger TMT bar producers do not mark up prices at a situation when iron ore prices are going up than that would be a death blow to small steel manufacturers, Beriwala said.
A SAIL official said that there were no indications from the large steel makers to increase prices of TMT bars or any structural steel, since demand was already low. But for the smaller players the supplies are just matching the demand.
However, Bipin Vohra, CMD of SPS group, making around 1 million tonne per annum steel ( mainly TMT bars), felt that prices of TMT bars and other structural steels would be marked up shortly since cost push were from all sides. ?Even if the impact of higher iron ore prices is lesser on the large steel producers, it gets off-set by higher over head costs,? Vohra said.