Steel users brace for price hike

Calcutta, March 2: Steel companies are gearing up to raise prices by Rs 2,000-3,000 a tonne this week after the budget left untouched the levy on iron ore export.

They will meet steel minister Ram Vilas Paswan tomorrow and present their case.

Paswan had promised them that he would look into the increasing prices of raw materials such as coke and iron ore.

However, neither the customs duty on coking coal was cut nor the export duty on iron ore increased in the budget, disappointing the industry which has seen input costs rising Rs 7,000 a tonne from October till date.

The companies had passed on an increase of Rs 2,500 a tonne to the consumer last month, before Paswan prevailed upon them to roll back prices by Rs 500 a tonne on selected items.

“He had assured us to take up our case with the commerce and finance ministry. But nothing happened. We have to increase prices to cover losses,” a steel industry executive said.

The domestic steel price is now hovering at $800, or Rs 32,000 a tonne. However, the landed price of imported steel has touched $900, or Rs 36,000 tonne.

“Bookings are taking place at $900 a tonne. This may actually go up to $950. The price differential between imported and domestic steel is widening,” an industry observer said.

Last year, the finance minister had imposed a Rs 300-per-tonne duty to discourage iron ore export, but it had no impact because the exporters, earning a profit of Rs 2,000 a tonne, were in a position to pay the duty.

This year the industry was lobbying with the government for raising the duty, if not a ban on export.

Tata group chairman Ratan Tata, who also heads the investment commission, recently wrote to Prime Minister Manmohan Singh urging a halt in export.

The budget did not address the issue, while the customs duty on coke, which is in short supply, was kept intact at 5 per cent. Prices of coking coal, used for making metallurgical coke by the industry, has risen 200 per cent.

The decision to raise prices is coming a month ahead of new global contracts for iron ore where miners such as Vale of Brazil will charge 65 per cent more than last year.

Domestic producers have already said they would effect a Rs 4,000-5,000-per-tonne price hike in April. It now looks that there will be a round of price hikes in this month itself.

The UPA government is trying hard to curb inflation as the general election will be held next year.

The industry was expecting a government intervention in iron ore given its high prices. Coking coal is mostly imported and, therefore, not much can be done but a cut in duty.

“If the government wants to reduce steel price, it should ensure raw material prices are kept in control. You cannot fix the output price, while letting the market control the input prices,” industry officials said.