Steel prices may go up by Rs 1,500/tonne from Wednesday

MUMBAI: Steel prices, which had been falling since May, could pick up from September 1, with companies prompted to raise price levels due to cost pressures. The quantum of hike, which could be Rs 1,000-1,500 per tonne on an average, will also reflect a marginal increase in demand from user industries after a sharp fall in their inventory levels, said industry executives.

Prices of hot rolled coils, the base grade category that is indicative of the price trend in the industry, are currently at around Rs 31,000 per tonne. “There has been no respite from coal and iron ore prices despite a fall in steel prices since May, so companies will have no option but to raise prices,” said JSW Steel joint managing director Seshagiri Rao.

The price hike will likely be implemented by companies such as state-owned Steel Authority of India, Rashtriya Ispat Nigam’s Vizag Steel, Tata Steel, JSW Steel, Essar Steel and Ispat Industries. Steel, which is used in a variety of industries ranging from cars and consumer goods to construction, had witnessed about a 25% fall in price since May.

But in comparison, prices of coking coal fell just 8%, while that of iron ore have gone up about 25%, in the same period. Coking coal and iron ore together account for about 75-80% of the total cost of steelmaking. On August 30, Indian and Japanese steel mills reached an agreement with Australian coal miners to fix the October-December quarterly price contract at $205 per tonne, which is lower than the $225-per-tonne price that is currently on for the July-September quarter.

Coking coal contract prices are fixed at least a month in advance. Iron ore contract prices have risen to $137 from $110 per tonne due to Chinese steel makers. “Steel prices will rise up mainly due to pressure from costs,” said Vishal Agarwal, managing director of Visa Steel, a Kolkata-based steel company that makes special steel.

“Although there has been a fall in coking coal prices, the contract price is still higher than expected by the steel industry.” The price hike can also be partly attributed to a fall in total output. The pressure from raw materials has led global players to cut production, bringing down total output to 115 million tonne in July, from 124 mt in April.

With user companies deferring purchases during the price fall and using their inventory to meet production schedules, it companies are expected to come back to the market.