Pricing power to help steel firms improve fortune

27 Mar 2017

With iron ore prices on a rise and domestic demand likely to pick up by mid-April, steel producers have already raised product prices by Rs 1,000 per tonne from 15^th  March and are gearing up for another hike by the same quantum from April. This time most of the companies are raising prices.

“Domestic steel firms at a closed-door meeting held 10 days ago have come to an understanding to unanimously raise product prices for April by another Rs 1,000 per tonne,” a source close to the development told Business Standard.

Domestic steel companies have raised prices by about 70 percent since imposition of minimum import price (MIP) in February 2016. Though prices were raised by Rs 3,000 per tonne in January, most companies had to roll back the hike in the following month either partially or completely as the market was unable to absorb the revision due to weak demand. However the confidence of companies that now consumers will digest higher prices seems to have been back and producer’s strategies are paying off.

“There has been a hike of Rs 1,000 per tonne in mid- March and going ahead we will be raising product prices in line with the industry,” a source with Essar Steel said.

JSW Steel, Tata Steel, Steel Authority of India, Bhushan Steel, Essar Steel, Jindal Steel & Power, and Rashtriya Ispat Nigam are among the top producers of the alloy in the domestic market.

“Price revision decisions are taken depending upon market dynamics and no meeting between steel producers was held to discuss prices,” said Jayant Acharya, director commercial at JSW Steel. “As iron ore prices having moved up in the last few months, we will be taking a call on product price hikes later in the month. No decision has been taken as of now,” he added.

Steel industry is seeing a demand pick up post UP elections mainly in the construction segment along with auto and white goods sectors which were hit due to demonetisation. In the last few months, as domestic steel demand failed to pick up and producers had to export the alloy in order to maintain margins and maintain the raised capacity utilisations. Average capacity utilisation of domestic steel industry has moved to 85 per cent from 75 per cent earlier.

As per Joint Plant Committee data, India’s Apr-Feb exports of steel have jumped 78 per cent on year-on-year basis to 6.62 million tonne, while imports have crashed nearly 40 per cent to 6.59 million tonne. Steel production for sale has increased 11 per cent to 92 million tonne, while consumption was at 76.22 million tonne, up 3.4 per cent from last year.

From the data available, India has emerged as a net exporter of total finished steel in February as well as April-February.

Source – www.business-standard.com in.reuters.com