Chinese exports less competitive on rebate cut

It is more important to see what is the average for the whole month, because that is how real pricing is done

Uttam Galva Steel is in news because the company has announced that they will be hiking galvanised steel prices by about Rs 1,000 a tonne, with immediate effect. Buoyancy in international prices has probably precipitated the price hike.

The Director of Uttam Galva Steels, Mr Ankit Miglani, says that steel prices have dropped from their highs, but they have stopped falling and have levelled off.

He added that he foresees zinc prices to go up much faster and expects it to be closer to the $3,700 odd range.

Excerpts from CNBC-TV18's exclusive interview with Mr Ankit Miglani:

Explain to us really the rationale behind increasing prices now, given that steel is a raw material for you and zinc has seen some amount of cooling off in the month of September?

You are absolutely right. There was some sort of cooling off at the beginning, but we must realise that the actual pricing is done on monthly averages and on global demand supplies.

On a day-to-day basis, one might see some slackening in prices, but if one looks at it on a monthly perspective, the prices have actually been consistently going up over the past few months.

As far as steel is concerned, the prices have come off from their highs, but they have stopped falling and have levelled off.

We are seeing an increase of $30-40 per tonne over the past couple of weeks. This is primarily because of the fact that Chinese export rebates have been cut, so their exports have become less competitive in the global market.

That has a direct impact on Indian steel industries because we have only a 5 per cent duty now and anything that happens in the world affects the Indian steel industry directly.

Today, internationally zinc is quoting at about $3,360 per tonne level. You have hiked prices by Rs 1,000 at this point in time. Going forward, how many more hikes are likely to match these international price levels?

The zinc price today is really less relevant. It is more important to see what is the average for the whole month, because that is how the real pricing is done.

If zinc stays at these levels, the average price will be higher than last month's average zinc price. But we foresee zinc to go up much faster.

We expect it to be closer to the $3,700 odd range in which case we would expect much stronger increases in galvanised prices also.

Could you quantify that?

It depends on the exact quantum of the zinc price increase, because zinc is probably a 7 per cent input cost for galvanised steel. According to that ratio, the prices of galvanised steel would keep increasing.

(This article was published in the Business Line print edition dated September 23, 2006)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.