The Hindu Business Line : Price hike: Steel cos make opposing claims

Rise in buyers' cost
In the case of long products, rebates had been slashed by an average of 40 per cent
For flat products, the rebates have been slashed by an average of 50 per cent

New Delhi April 5 Confusion prevailed in the domestic steel market over steel price hike with the hot rolled steel makers (manufacturers) and cold rolled steel manufacturers (their major consumers) making opposing claims on the issue.

While the hot rolled steel makers officially maintained that they would hold prices for April, the cold rolled steel makers said they had already been officially informed on the increases.

Primary steel manufacturers led by the Vice-Chairman and Managing Director of JSW Steel and the Senior Vice-President of Assocham, Mr Sajjan Jindal, on Thursday met the Finance Minister, Mr P. Chidambaram, and assured that the industry would hold the price line for this month, despite rise in input costs and pressure on their margins, to help it fight inflation.

Speaking to reporters after the meeting, Mr Jindal said: "We will not increase prices for the month of April, but will review the situation next month."

"It is not the Finance Minister alone who should be worried about inflation. Steel is the big item in the wholesale price-based inflation. We have to support the Government fight inflation," he said.

SAIL stance

However, officials in Steel Authority of India Ltd said that "though there is no price hike, the net cost that the buyers would have to pay now has increased since the rebates have been slashed by 40 to 50 per cent."

According to SAIL sources, in the case of long products, rebates had been slashed by an average of 40 per cent since these products have high usage in construction and infrastructure projects. In rupee terms, this would mean that the effective price would be going up by Rs 400-500 per tonne.

"Add to this a 10 per cent increase in railway freight because of their busy season freight policy. This would mean another Rs 200 to Rs 250 per tonne and the total increase would be in the range of Rs 600 to Rs 700 per tonne," SAIL sources said.

In the case of flat products, the rebates have been slashed by an average of 50 per cent, which is again around Rs 400-500 per tonne and with increased freight rates, the net impact would be around the same level as in the case of long products, SAIL sources said.

Up in arms

On the other hand, cold rolled steel manufacturers, who are the largest buyers of hot rolled steel, are up in arms and said that some of the companies had already informed them about the price hike.

The Executive Director of Cold Rolled Steel Manufacturers Association (Corsma), Mr S.C. Mathur, said: "the primary manufacturers have again increased the prices and do not heed to any requests even from the highest levels of the Government. While Indian companies are the lowest cost producers in the world with an average production cost ranging between $350-400 per tonne, they are selling in the domestic market at $630-640 per tonne while exporting at a much lower rate of $550 to 570 per tonne."

The companies have sounded out the major buyers, who are Corsma members, about the price hikes and have been asked to send official communication to this effect.

"Ispat has already informed officially of an increase of around Rs 1,400 per tonne which would mean that the price would now go up to around $690 per tonne from current levels of $640 per tonne. We are yet to receive a formal communication from the other manufacturers," Mr Mathur said.