Steel industry slashes prices

By OUR CORRESPONDENT

New Delhi, May 7: Steel companies on Wednesday slashed the price of flat products by Rs 4,000 per tonne and rebars and structural steel by Rs 2,000 per tonne, under intense pressure from the government.

Steel prices, which rose by nearly 49 per cent in the last one year, are among the major factors contributing to soaring inflation. With the Assembly elections in many states slated later this year and the general election due next year, inflation has become a very sensitive matter for the government.

All those producers who raised prices last month will reduce flat steel prices. Reduction on rebars and structurals will also be done although their prices were not increased.

"We endorse the government’s concern on steel prices contributing to inflation. Major steel producers have decided to reduce prices of flat products by Rs 4,000 per tonne and prices of rebars and structural steel by Rs 2,000 a tonne and hold these prices for next three months," said the SAIL chairman, Mr S.K. Roongta.

Ernst and Young partner, Mr Navin Vohra, said that steel companies’ margins will be hit as the prices of raw materials are still high. He expected the prices of iron ore and coking coal to start moderating in next three months to one year.

"Last year was unusually high for the prices of coking coal and iron ore due to disruption in their supplies because of floods and other factors," said Mr Vohra.

Steel producers in a meeting with the Prime Minister, Dr Manmohan Singh, demanded the removal of duty on steel exports. They said that the government has assured the industry of putting on hold the notification export duty on steel.

The finance minister, Mr P. Chidambaram, had earlier announced up to 15 per cent duty on steel exports as a measure to increase domestic supply of steel.

In January due to heavy rains in Queensland, Australia, six miners had declared force majeure. India imports 80 per cent of its coking coal from Queensland.

Force majeure is a clause in contracts which frees both parties from liability when an extraordinary circumstance prevents them from fulfilling their obligations. Recovery for some miners is expected as late as November.

Though spot market for coking coal is typically very small, it has become an important source for the Indian steelmakers this year because of major disruptions in coal supplies. Other global steel companies are also facing the impact of disruption in supplies from Queensland. The world’s fourth largest steelmaker Posco agreed to treble the price of coking coal from an Australian miner.