Steel companies mull 2-5% price hike on demand recovery

Steel companies mull 2-5% price hike on demand recovery
The Economic Times, July 1, 2009, Page 7

Sumit Chaturvedi & Subhash Narayan, ET NOW

STEEL prices could go up by 2-5% in July, with some of the country’s largest steel producers such as SAIL, Ispat and Jindal contemplating price hikes. Prices are likely to go up in the range of Rs 500-1,000 per tonne for various products. Some steelmakers had raised prices by Rs 500-1,000 a tonne in May and June. Steel prices had fallen sharply last year due to the effects of the global economic downturn. There has also been a rise in raw material prices.

The country’s largest steelmaker, SAIL, is likely to increase prices of certain grades by Rs 500-750 per tonne. Ispat Industries is also looking at increasing the price of hot rolled coil (HRC) by Rs 700-1,000 per tonne, while JSW, Essar and Tata Steel are reviewing the situation and would take a call in the first week of July.

“I don’t think there is any possibility of a substantial increase in prices, but small adjustments can always be made. For spot customers, we will look at prices afresh in the first week of July,” SAIL chairman

SK Roongta said. “It (price increase) is an ongoing process. Some small adjustments to the tune of Rs 500-750 per tonne, that’s about 1-2%, keep on happening,” he added. SAIL had made minor changes in prices and withdrew discounts in May and June.

“We take a call in the beginning of month on price rise. In any case, price variations is only for spot customers, who constitute 20-25% of our customer base,” said a Tata Steel spokesman. An executive with Ispat Industries said the company may raise prices by Rs 700-800 per tonne or more in July as the company had not increased prices either in May or June. “We are reviewing the situation and nothing has been finalised as of now,” said a spokesman for Essar Steel.

The benchmark HRC prices are hovering around Rs 27,000-30,000 a tonne. This is still slightly higher than international prices. The gap has, however, now narrowed as steel prices have moved up marginally in some other countries too.

Domestic companies want to take advantage of a pickup in demand in the domestic market, which is mainly coming from increased steel consumption in sectors such as infrastructure, rural housing and automobiles.

“While the domestic demand has maintained its pace, increasing steel price may be difficult as prices have fallen by $50 a tonne in China,” said an executive with a private sector steel company.

India is the only major economy expected to show a growth in steel consumption (2%) in 2009, according to the latest forecast of World Steel Association (worldsteel).