The Hindu Business Line : Global steel price rise likely to hit imports

FOR the first time in recent years, international steel prices have increased to a level higher than domestic prices, making steel imports an uneconomic proposition.

During the past 15 days, the average international price of hot rolled steel has increased from the level of $390-400 per tonne to $430-440 per tonne c.i.f. (cost, insurance and freight), which is at par with domestic prices.

The existing 15 per cent import duty payable on this cost takes the final price to more than $500 per tonne, according to steel industry sources.

Domestic prices have also risen and are ruling at Rs 18,000-23,000 per tonne for different grades, which is equivalent to the international price.

Sources said that this sudden and unprecedented spurt in steel prices is because of a sudden shortage of three key inputs required for steel production - coke, iron ore and steel scrap.

"Though Indian producers are having problems with the poor availability of coke, it has enough iron ore and is the largest producer of sponge iron in the world, which is a substitute of steel scrap. As such, Indian producers are not affected. In fact, their realisation in the international market is increasing and steel exports are likely to see a spurt," said a top executive with a steel company.

In the last four months, international steel prices have gone up by more than 30 per cent. According to available indications, prices will continue rising till March.

One of the reasons for the spurt in prices is that China has replaced the US as the world's largest consumer of steel and the country has imported 35 million tonnes of steel during 2003 in addition to domestic production and consumption of 250 million tonnes.

While China is likely to continue importing steel, a spate of mining accidents and rising internal consumption has seen its exports of coking coal drying up, adding to the pressure on international prices.

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Global steel price rise likely to hit imports