Steel up on rising raw material costs

Ishita Ayan Dutt / Kolkata March 15, 2008

Steel prices continue to climb sporadically on the back of rising raw material prices and strong demand despite the government’s call to rein in prices.

Steel Authority of India (SAIL), the public sector steel behemoth, has hiked prices of semi-finished steel by Rs 1,500 a tonne, its second increase in less than a week, while Kolkata-based SPS Steel & Power increased TMT bar prices by Rs 6,000 a tonne yesterday.

SAIL’s last hike on semis, on March 5, was of Rs 2,500 a tonne. The price now stands at Rs 37,000 a tonne.

However, market sources said the price was still below the average market price of semis controlled by local players in the eastern part of the country. The semis market in the eastern region is around two lakh tonnes of which major producers account for less than 10 per cent.

SAIL’s Durgapur Steel Plant and Bhilai Steel Plant manufacture semis, categorised as blooms, billets and slabs. One of the reasons for the hike is increase in raw material prices, which have gone through the roof.

Captive sources cover 35 per cent of SAIL’s coking coal requirements and all of the iron ore needs. International prices of coking coal, largely imported by domestic producers, and coke have surged.

Spot prices of coal and coke have surged to $300 and $600 a tonne respectively compared with $100 last year. The new contracts for coke are yet to be negotiated.

An industry source said that the landed cost of coke currently is $20 higher than what it was last week and Indian iron ore export prices are higher by $6 a tonne this week, taking the price to $152 a tonne.

“Floods and port congestion in Australia have resulted in many of the companies declaring force majeure on some shipments, thereby restricting supplies in the world market,” said sources.

Apart from raw material prices, the demand is also very strong. Hence, the increase in prices is being absorbed by the market.

SAIL, however, is not alone. Producers depending on their ability to absorb the cost push have been increasing prices as well.

Bipin Vohra, chairman, SPS group, said, “Despite four hikes, margins were still low due to increase in raw material prices. SPS is now selling TMT bars at Rs 47,500 a tonne.