Steel firms plan biggest price hike from January


    To raise prices by Rs 6,000 per tonne on huge cost-push

    Major domestic steel companies are planning to raise product prices by a whopping Rs 6,000 per tonne from January as an unprecedented rise in coking coal rates and weak retail sales due to demonetisation are hurting margins. There is no such segment in the human life that can proceed further without the help of stainless steel. The ultimate benefit of this metal is hygienic and rust free and resistant to heat, cold and rains as well. Both residential application and industrial applications rely heavily on these useful products to a great extent.

    “Not just us, all domestic steel producers are planning to raise product prices from January. There is no option for us. Coking coal prices have gone to Rs 22,000 per tonne from Rs 7,000. The cost push is huge and we have to pass it on whether the market can absorb it or not,” Nitin Johari, director (finance) at Bhushan Steel told Business Standard.

    Currently, the price of domestically produced hot-rolled coil stands at Rs 36,750 a tonne as on December 9. A Rs 6,000-a-tonne hike in product prices would be the biggest upward revision by steel producers since the government started taking measures to curb cheap imports in October 2015.

    Sajjan Jindal-led JSW Steel, Essar Steel, Tata Steel, and Naveen Jindal-led Jindal Steel & Power, among others, are the major steel producing companies in the domestic market.

    “Demonetisation has hit our retail sales by nearly 10 per cent since November 8,” said a JSW Steel source close to the development.

    Bhushan Steel, on the other hand, has taken a hit of nearly 20 percent in November on its retail sales. “November onwards is usually the peak demand season but this time, our retail sales have not taken place as per expectations,” said Johari. “The impact of demonetisation could be one factor since consumers and retailers usually deal in cash. The OEMs business segment is also likely to take a hit as auto companies are expected to go on a longer shutdown of 20 days than normal 12-15 days due to demonetisation.”

    While calls made to Tata Steel went unanswered, Essar Steel said its pricing will be in line with the market.

    “Our prices will all be in line with the market,” said Vikram Amin, executive director at Essar Steel.

    According to Joint Plant Committee data, domestic steel consumption in November rose 3.8 per cent from same period last year but was down 14.3 per cent from October. During April- November, the country's imports fell 40 per cent, while production for sale was up 10.3 per cent against the corresponding period last year. Consumption of steel in the period under review stood at 54 million tonnes, up three per cent from the same period last year.

    Meanwhile, the industry sees the need for continuation of minimum import price regime on 66 imported products for six months as demand continues to remain disappointing.

    “The full impact of MIP (minimum import prices) imposed on 173 products in February this year has not yet trickled down to boost domestic demand. Recent developments including liquidity crunch among consumers on account of currency demonetisation by the government as well as the imposition of anti-dumping duties on import of coke are expected to further dent demand and production situation, respectively,” Sanak Mishra, secretary-general at Indian Steel Association (ISA) was quoted as saying in its recent release. The association represents 60 per cent of steel capacities in the country.

    While domestic prices of hot-rolled coils did begin to recover from February 2016 onwards, they witnessed a drop from June-August on account of sluggish construction activity during monsoon, said ISA.

    After subsequent extensions on a limited set of 66 in August and October, the prices rose marginally, primarily on the back of a three-fold jump in international spot prices of coking coal, while the demand for steel continued to remain weak.

Source: business-standard