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The forging and auto component industries have hauled the steel companies for indulging in price cartelisation and have urged the government to regulate domestic steel prices.
In a letter written to Prime Minister Narendra Modi, the Association of Indian Forging Industry said the price increase demand from steel mills across the country is the exact same and the demand letter is identically worded, showing cartelisation among them in this matter.
Incidentally, the Competition Commission of India is already probing into the cartelisation charges against steel companies.
Forging exporters have long-term contracts with customers and price compensation for material increases is mainly based on the American Metals Market and Euro Forge.
In the last one year, steel price has moved up by ₹16,950 a tonne and was hiked further by ₹6,000 a tonne last month, taking the total increase to ₹22,450 a tonne. In the same period, steel prices in the US was up by $175 (₹12,800) a tonne while in Europe it increased by €150 (₹12,900), the association said.
As a result of sharp increase in steel price, the forging industry has to execute long-term commitment with a loss. In addition, logistics costs have nearly doubled and forced many MSMEs in the sector not to accept new orders, the association said.
New inquiries
Vikas Bajaj, President, AIFI, said the forging industry has started getting new inquiries from North America and Europe due to diversification of sourcing from China.
Unless and until the government intervenes to stop the disproportionate and unreasonable steel increase, the entire Indian automobile, auto component and forging industry would become uncompetitive on a global stage, he added.
The forging industry comprises 85 per cent of the MSME sector and second-largest next only to China. It has an estimated turnover of ₹40,000 crore, of which exports account for ₹14,000 crore. For the fiscal year 2021-22, forging production is expected to grow at a CAGR of over 10 per cent between 2021 and 2024.
Yash Jinendra Munot, Vice-President, AIFI, said steel is the primary raw material for the forging industry and accounts for 60-65 per cent of the ex-factory value of forgings. This is expected to rise to around 75 per cent with the recent steel price increase.
Steel prices have risen by 25 to 30 per cent in the last six months, putting the forging industry at serious risk, especially as it recovers from Covid-related business losses and the resulting impact on cash flow and cash reserves, he said.
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