V. Sridhar

Bangalore: Chairman of the Steel Authority of India Ltd. S.K. Roongta said the company would hold steel prices for “two to three months.” He said this was an immediate response to a statement by Prime Minister Manmohan Singh in Jamshedpur last Tuesday that steel producers should not unduly focussed on short-term profits.

Mr. Roongta said although several competitors had also announced similar voluntary restraint, they had imposed “raw material surcharges” amounting to about Rs. 5,000 a tonne just before they made similar announcements.

Dealer network

Mr. Roongta was in Bangalore to give away awards to dealers instituted by SAIL’s Central Marketing Organisation. The company’s sustained efforts had resulted in the dealer network expanding from about 200 in 2005-06 to 1,800. The company bore a cost of Rs. 500-600 a tonne in ensuring that steel was supplied to consumers in far-flung and remote parts of the country at the same price paid by other consumers across the country.

Profitability

Asked whether the decision to hold prices would affect SAIL’s profitability, Mr. Roongta said the “considerable price revisions” made earlier, between January and March, would ensure that the company was not adversely affected. He refused to speculate on how long SAIL might be able to hold prices, beyond the 2-3 month horizon.

Mr. Roongta said the increase in raw material prices — particularly coking coal and iron ore — had adversely impacted steel producers. Coking coal prices — under the long-term scheduled contracts — had increased from $98 a tonne in 2007-08 to about $300 for 2008-09. SAIL, unlike its leading private sector competitor Tata Steel, was heavily dependent on imports (about three-fourth of its coking coal requirements are imported). Iron ore prices, Mr. Roongta said, had increased by about 65 per cent in the last year, although SAIL was entirely self-sufficient in this respect.

During 2007-08, SAIL produced 15 million tonnes of hot metal, 14 million tonnes of crude steel and 13 million tonnes of saleable steel. About 35 per cent of the finished steel produced was as value-added product.

Indian steel consumption was growing at 12-13 per cent, which was “one of the highest in the world — only slower than China and perhaps Brazil.” The company plans a capital expenditure of Rs. 54,000 crore on its modernisation and expansion programmes.