Hoping demand for steel to pick up in the New Year, domestic producers have raised its price by upto Rs 1,500 a tonne to offset rising input costs and higher freight charges.
“Almost all steel makers have raised price in the range between Rs 1,000 and Rs 1,500 per tonne. This is to tide over rising input and freight costs and aimed at improving falling margins,” an official from a private sector steel maker said.
Following the hike, the price of hot rolled coil (HRC), the benchmark steel product, went up to Rs 39,500 a tonne from Rs 37,500 per tonne earlier.
Steel makers generally hike prices in tandem to remain competitive. But, it could not be confirmed individually as to whether all of them have effected the hike this time also in the same range.
Steel makers had previously hiked the price in September by up to Rs 2,500 per tonne, but held on to it since then despite the NMDC hiking iron ore price by Rs 100 a tonne and the Railways imposing peak session charge from October.
The subdued market conditions, as a result of poor demand from end-use segments such as construction and white goods, also prevented them from jacking up the price. India’s steel demand grew by just 0.4 per cent during April-November period of the current fiscal.
“The price hike is primarily to offset the increased cost of iron ore and Railway freight. These together inflated cost of steel production by around Rs 700 per tonne,” the official said.
Barring Tata Steel and Steel Authority of India, domestic steel makers mainly source their iron ore requirements from NMDC. An additional hike of Rs 200 a tonne in December by the PSU has impacted private sector steel makers. It generally takes 1.6 tonne iron ore to produce a tonne of steel.
The cost push went up further by around Rs 200 per tonne with the Railways imposing its annual busy season charge on freights from October.
“Steel makers have been rolling over prices since October this year. It has now started to pinch their bottom lines.
Hence steel prices are expected go up by around Rs 1,000 per tonne,” he added.
Steel makers have also found a new reason to pass-on the inflated costs to consumers as their share of exports are on the rise leading to overcapacity situation in the domestic market being reduced.
Most of the leading domestic producers including SAIL, Essar Steel, Jindal Steel and Power and JSW Steel had raised prices in August and September, expecting a revival in demand.