THE government has asked cold-rolled (CR) steel makers to voluntarily reduce prices as it is adding to inflationary pressures. However, domestic CR steel producers say the price hike is inevitable given the sharp rise in hot rolled (HR) steel prices. They have, in fact, proposed to the government to ban HR steel exports. CR steel, consumed by sectors such as construction, automobile and other consumer products, is value-added steel using HR steel as a raw material.
As a result of increase in iron ore prices, steel prices have already shot up by 25-30% over the last three months, increasing HR steel prices to around Rs 34,000/tonne. Hot rolled steel accounts for 70-80% of the cost of producing CR steel.
In a meeting with representatives of secondary steel producers’ associations and makers of sponge iron, pig iron and CR steel on Wednesday, steel secretary Raghav Sharan Pandey said prices of CR steel should be brought down voluntarily. The government’s contention is that CR steel firms are boosting their profit margins by raising price.
However, CR steel producers have asked the government to deal with supply-side issues first. They said besides keeping a check on mounting raw material prices, the government should take measures to fill the domestic demand-supply gap of HR steel.
“As of now there’s a demand-supply gap of 2 million tonnes of HR steel in the country. While some steps have been taken by cutting down export incentives (DEPB benefit), it won’t be enough to stop the HR steel makers from exporting and therefore, additional measures need to be taken,” CR Steel Manufacturers Association president SC Mathur said.
As HR steel prices have increased significantly due to high iron ore prices, secondary steel makers say they are under huge cost pressure. “Besides iron ore, other raw materials like coke, coking coal prices and ocean freight have increased drastically. So if we do not increase our prices in such a situation our bottom line will be severely affected,” said Delhi-based Bhushan Steel director (finance) Nittin Johari.
Some CR steel makers are awaiting the next move of HR or basic steel producers. “We are only converters of HR steel into downstream products. The price increase in our product would be a function of HR steel costs. If HR prices do not go up, we too may hold prices,” said a source. However, basic steel producers are also under immense cost pressure as iron ore prices have gone up globally. They are expecting further hike in raw material prices.