Grappling with high input costs and sluggish market demand, domestic steel companies have resorted to price hike to maintain their margins. All the major integrated steel producers have raised the prices by R1,000-R2,000 per tonne for various grades of steel beginning this month.
The hike has come at a time when the country’s industrial growth has slowed down on weak demand, forcing downward revision in prices in several other sectors.
According to a steel company official, prices of hot-rolled coils (HRC) have gone up in the range of R1,000 to R1,200, while that of cold-rolled coils (CRC), used largely by the white goods industry, and hot-dipped galvanised steel are up by R500-R1,500 and R1,000-2,200, respectively.
The official said Steel Authority of India (SAIL), Tata Steel and Essar Steel were among the first ones to go for price hikes, while others may follow suit soon. Officials from SAIL were not available for comment. A Tata Steel spokesperson said the company was yet to finalise any price hike.
Steel prices for the various categories have been going up. In Delhi, the price of hot-rolled coil steel (used as an intermediate product for industrial consumers) rose from R44,110 per tonne in June to R44,160 in August, while for cold-rolled coils, the prices grew from R47,580 to R48,500.
The steelmakers had last month indicated that there would a price hike from October onwards as the demand would pick up post-monsoon. The increase, however, comes at a time when steel consumption is growing at a far lower rate than production.
In April-August 2011, the production grew 9.9% to 29.06 million tonne (mt) from 26.45 mt in the same period a year ago. However, the consumption grew by mere 1.3%, from 27.69 mt during April-August 2010 to 28.05 mt this year. Steel company officials said even though the consumption was low, it would pick as the construction activities pick up and therefore, the marginal hike in prices could be absorbed.
According to steelmakers, it was inevitable for the companies to go for a price hike to maintain their margins. ?If we do not do it, we’ll run into losses,? said an official, who did not want to be named.
The steel companies’ profits were heavily impacted due to high coking coal prices that had shot up to $330 per tonne in January.
The increase in the prices may discourage automobile and white goods manufacturers that are already reeling under huge pressure due to slump in demand. ?Around 60% of our production cost is of raw material. This would certainly impact us. We can not pass it on to the customers as there is already such a low demand for white goods in the domestic market,? Soli Mullan, head of steel procurement (consumer products), Godrej, said.