With the sharp rise in iron ore and coking coal prices, steel companies are set to hike prices by Rs 1,000 to Rs 1,500 a tonne in February. Though manufacturers such as Tata Steel, JSW Steel and Essar Steel have hinted at a possible increase, there has been no reference to the quantum of the hike.
The recent increase in global steel prices has provided enough headroom for companies to pass on the incremental cost of production to end-users.
Flat steel prices have gone up by about 10 per cent since November in Europe, 37 per cent in the US and 30 per cent in Russia. Prices in China have relatively ruled flat in contrast.
Mr Vikram Amin, Executive Director, Essar Steel, said with Indian steel prices aligned to international levels, they will have to keep in line even if margins are under pressure. “If domestic prices are higher, there is always a chance of cheap imports. At present, international prices are higher,” he said.
Mr Jayant Acharya, Director of JSW Steel, said costs of raw materials, especially that iron ore and coking coal, have jumped substantially in the last few months. As a result, steel prices have had to move in tandem with input costs.
Coking coal (Australia spot) prices have jumped 56 per cent in the last one year to $270/tonne, while iron ore fines are up 38 per cent to $182/tonne and LNG 47 per cent to $10/ million metric British thermal units.
Despite the increase in raw material costs, steel makers have been unable to hike prices due to lower global prices. Domestic HR coil prices (ex-works) have gone up 13 per cent to Rs 33,250/tonne in the last year, while the landed cost of imports rose 14 per cent to $729/tonne (around Rs 32,800). Steel importers were also benefited by the weak dollar (against the rupee).
The likes of SAIL and JSW Steel reported a drop in net profit during the December quarter despite higher sales.