In a bid to assuage concerns around steel pricing and allegations of industry cartelisation, Tata Steel has suggested index-based pricing to promote transparency and ease the pressure on both the user as well as steel companies.

“We can find a way to index steel prices and follow it both ways when prices go up and down. I say this from my experience in NatSteel in Singapore,” TV Narendran, Managing Director, Tata Steel told BusinessLine.

“When steel prices dropped two years back, I do not think any benefit went to the government. So if we have an index it will benefit both ways. We have to think of some mechanism. As a steel company, if asked for a fixed price forever I am happy to offer it. Instead of dealing with different price points at $350 and $1,000, if you give me a $650 guaranteed price it will help us in making investments. As steelmakers, we want a steady price but it does not work that way,” said Narendran.

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Early this month, the Association of Indian Forging Industry had alleged that the steel industry had formed a cartel as the demand letter for a price increase from steel mills across the country was worded identically.

Countering this, Narendran said “I do not think no company or group of companies can control steel prices. Ultimately, what happens in steel prices is dependent on what happens in China.Every other thing is irrelevant.”

Citing an example of how the index in Singapore has helped stakeholders, Narendran said that steel in a road project is just 5 per cent of the cost. If steel price goes up by 30 per cent, then the cost goes up to 8 per cent. “Eventually, the person building the road in Singapore follows the index to ensure the contractor does not suffer and the government benefits if steel prices drop,” he said.

The user industry has been complaining that high steel prices have been draining their competitiveness and their existence is threatened with margins being wiped out.

Narendran said it is unfair to accuse steel companies as prices in India are just reflecting what is happening in the international markets. “We did not have too many sympathisers when steel prices dropped. It is unfair to accuse the industry of doing something different,” he said.

“If the steel price in India was going up and in the rest of the world it is dropping then you can say something is fishy,” he added. “I dare say, still steel prices in India are cheaper compared to anywhere in the world even during the peak.”

Narendra said that while steel price in Europe is €1,100, in the US it is $1,800 but in India it is less than $1,000.

Also read: Tata Steel logs Q1 profit of ₹9,768 cr on higher sales, better realisation

“Nobody likes steel prices going up rapidly, we respect that sentiment. Many people who had fixed-price contracts were extremely upset,” he said. “But they should not blame the Indian steel industry in isolation as it was a reflection of what was happening globally.”

Tata Steel had reported a consolidated net profit of ₹9,768 crore in June quarter against a loss of ₹4,628 crore logged in the same period last year, on the back of higher sales and better realisation. The net profit in the quarter was much higher than the full-year profit of last fiscal.

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