The Hindu Business Line : `Price of steel in auto parts should hold steady'

TOP executives of Bharat Forge Ltd (BFL) and Mukand Ltd, suppliers to the automobile industry, have said the price of steel used to make auto components should hold steady during this year.

At Tuesday's press briefing on BFL's FY05 results, Mr Baba Kalyani, Chairman and Managing Director, said, "I think we are beginning to see the end of the up-cycle in steel; we are seeing prices hold pretty steady. By year-end, we should see a gradual decline in prices. We don't see any increase. The worst is over in steel."

He said there had already been a softening of sponge iron and metallic-prices.

BFL has a sizeable play in steel forgings with backward linkage into alloy/special steels through group companies such as Kalyani Steel and Kalyani Carpenter Special Steels. It also has a joint venture with Mukand. Last year, BFL's expenditure on raw materials increased 75.03 per cent to Rs 551.95 crore from the previous corresponding Rs 315.35 crore.

Also, on Monday, Mr Rajesh V. Shah, Managing Director, Mukand, told Business Line that steel prices for the automobile industry should hold steady. He was not expecting a price rise for the next one year, particularly since prices for stainless steel long products and alloy/special steels - which Mukand makes - do not traditionally increase as sharply as they do in flat products.

Mukand has considerable exposure to the automobile industry.

"We understand and appreciate our customers' need to have steady prices at least for the next one year," Mr Shah said.

The company's sale price had been revised upward by 20-25 per cent across products in FY05 as raw material prices went up by 100 per cent or more in select cases.

BFL officials said Mr Kalyani's observations on price were specific to steel grades used in auto components. But that, as well as Mr Shah's comments, should come as a relief for automobile manufacturers who have complained of high steel prices.

Although mainstream steel manufacturers were a divided lot on the price outlook for FY06, some speculating of Chinese demand softening and others inferring strong price trends from long term Asian economic growth, most vehicle manufacturers continued to be worried at year-end press meets on their results.

Tata Motors saw a 43.01-per cent rise in expenditure on raw materials and components to Rs 11,929.48 crore (Rs 8341.39 crore for the year ago period) in FY05. Senior company officials said a week ago that, given high steel prices, they would explore options for sourcing steel elsewhere.

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