The Hindu Business Line : More steel majors cut prices

A DAY after Tata Steel announced a price cut of Rs 2,000 per tonne on all products, Steel Authority of India Ltd (SAIL) and other leading steel majors on Monday announced a cut in prices.. The reductions range from Rs 500-1,000 a tonne.

SAIL has reduced prices by Rs 1,000 a tonne for flat as well as long products. The reduction will be effective Monday for products across all segments, the company said in a news release.

Taking into account the corresponding impact on excise duty and sales tax payable by the customer, the effective reduction in cost will come to about Rs 1,150 per tonne.

Essar Steel cut prices by Rs 560 a tonne in its sales price (including excise duty) for its direct domestic customers.

"The price reduction takes into account the differential cost structure of various steel producers as Essar Steel does not have its own captive iron ore/coal mines and control over its fuel cost which some of the other steel producers have," the company said in a release.

Essar Steel's monthly sales stand at two lakh tonnes, of which exports account for 30,000 tonnes.

Jindal Vijayanagar Steel Ltd (JVSL) also has slashed prices of hot rolled coils and sheets by Rs 600 a tonne (inclusive of excise duty) for all its customers.

"It is expected that to rein in the inflationary pressure on the economy, users of steel will take appropriate steps," it said in another release.

Ispat Industries Ltd has slashed prices by Rs 500 a tonne on hot rolled products, excluding taxes.

The reduction will be effective for all its domestic end-users.

The reduction in steel prices is likely to impact profit margins of some of the companies, especially those that do not have backward linkages into raw material supplies.

However, a stable steel price scenario is indirectly beneficial to steel companies. "Volatility in prices does not augur well in terms of demand or marketing of steel products," said an official of a leading steel company.

"SAIL has all along been a strong believer in stabilisation of steel prices and has substantially reduced exports to make more steel available in the domestic market. A price reduction by SAIL will have a positive impact in lowering domestic steel prices. We hope that the benefit would get passed on to the ultimate consumers," SAIL said quoting Mr V.S. Jain, Chairman of the company.

Essar said it has taken various measures to provide stability to the domestic market, including maintaining the same price since March 2004 and introducing quarterly pricing. "The current price reduction not only provides stability to the domestic market but also will give competitive advantage to all consumers of flat products as even today domestic flat product prices are significantly lower than the prevailing international price," the company said quoting Mr Prashant Ruia, Managing Director, Essar Steel.