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Thursday, May 23, 2002

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Steel prices likely to go up

Ambarish Mukherjee


DOMESTIC steel prices, which have increased in two phases since the beginning of the current fiscal, are likely to go up further.

In a surprising turn of events, the Indian steel industry, which was among those who cried the loudest following the 30 per cent anti-dumping duty imposed by the US this March, has actually emerged as a beneficiary of the US Government's decision.

The Indian companies used the US tariff to justify raising prices in the domestic market, the first hike since April 2000. And to their utter surprise, they have discovered that the domestic market is not only absorbing the price hike but off-takes are also higher as consumers are building up inventories in anticipation of further price hikes.

Not only have prices gone up by 6 to 14 per cent, several companies are also contemplating an increase in their capacities. Ispat Industries is reportedly planning to increase the capacity of hot rolled products at its Dolvi plant by around 60 per cent from the current 1.5 million tonnes to 2.4 million tonnes.

The industry expects the prices to go up further. According to a highly placed source in Steel Authority of India (SAIL) who requested anonymity, "Prices are increasing and there may be another round of hikes before September this year. But to make out whether we have really reached the end of the tunnel, one has to wait till after September, to know if the rally goes beyond six months or not."

Domestic prices of hot rolled products went up by 10 to 14 per cent during the past seven weeks and that of cold rolled products have increased by around 6 to 10 per cent. On the other hand, international prices of these products have hardened by around 20-25 per cent during the same period.

Domestic manufacturers are currently busy studying the world steel economy; going by the existing trends, most of the companies are "cautiously optimistic" about the current year's prospects. Prices are still quite low compared to the peak levels of 1995-96 and so if there's no sudden reversal in the international trends, year-end prices may be higher by more than 25 per cent, industry experts feel.

Domestic industry toes global line

THE domestic industry's expectations are quite in line with global happenings.

The world's largest steel maker, Luxemburg-based Arcelor, announced last week that the company expects prices of its most widely used steel items to be higher by around 30 per cent by the year-end compared to last year.

The company has reportedly initiated talks with Pennsylvania-based Bethlehem Steel Corporation to take over the latter's Burns Harbor plant in Indiana, which would enable Arcelor to bypass US tariffs.

Brazilian steel manufacturers have already increased prices of slabs by around 20 per cent after losing access to the US market.

Japan's Kawasaki Steel is reportedly considering elimination of about 6 per cent of its capacity as it prepares to merge with another Japanese steel giant, NKK Corporation, while China has already eliminated its export tax on steel.

Simultaneously, China Steel Corporation of Taiwan has raised its second quarter earning forecast, banking on the continued rise in steel prices.

Many countries are also erecting their own quota-like entry barriers to protect their domestic manufacturers like Malaysia, which has slapped a whopping 50 per cent tariff on several imported steel products in order to check cheap imports from Japan, South Korea and Taiwan.

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