Companies

CCI opens probe into ‘cartelisation’ by steel mills

Suresh P Iyengar Mumbai | Updated on February 10, 2021

Steel companies have been blaming the sharp rise in raw material cost   -  ROY CHOWDHURY A

Will suo motu investigate if any concerted price setting has happened

After cracking down on cement companies, the Competition Commission of India has launched a probe against steel companies for forming a cartel to increase prices consistently over the last seven months.

The anti-trust regulator will scrutinise the business strategies of leading steel companies to check if they have colluded to jack up prices artificially.

Though user industries have been complaining about the recent spike in steel prices making them uncompetitive both in global and domestic markets, the CCI has taken up the investigation suo motu, said sources close to the development.

Rising raw material cost

Steel companies have been blaming the sharp rise in the raw material cost, especially the 135 per cent surge in iron ore prices, for the increase in prices.

Dubbing the concern of user industries as unfounded, Seshagiri Rao, Joint Managing Director, JSW Steel, in a recent interview, told BusinessLine that domestic prices are still at a discount to the landed cost of imports, particularly after the 80 per cent rise in China and 119 per cent in the US.

“When steel prices hit the rock bottom and steel companies were losing their shirt, there was no concern raised by anybody. The RoCE (Return on capital employed) in steel industry is much lower, at 14-15 per cent, and does not enable us to re-invest,” he had said.

Calling for a regulator to check the rising steel prices, Nitin Gadkari, Union Road Transport Minister, had last month said that every steel company has its own iron ore mines and there has been no increase in labour and power costs, but they are increasing rates.

Logic of comparison

SN Subrahmanyan, CEO and Managing Director, L&T, also echoed the Minister’s concern in a recent interview and questioned the logic of the steel companies comparing domestic prices with landed cost of imports. “Something is being sold in America at X price and I am selling it at 5 per cent lower. Is that the way you want to compete in the world? You have to see what is the fair price here? Why did the steel that was supplied at ₹33 per kg jump to ₹66,” Subrahmanyan asked.

On its part, the government has waived the anti-dumping duty on a few steel products till September-end and halved the Customs duty to 7.5 per cent on import of semis, flat and long products of non-alloy, alloy and stainless steel.

However, with the international steel prices remaining high and most imports from FTA countries — Japan and Korea — being duty-free, user industries are hoping that China will be the saviour, as usual.

Published on February 09, 2021

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