Indian Steel Prices to Rise From October

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Guest commentator TC Malhotra contributes from New Delhi.

Indian steelmakers plan to increase prices by about 3-5 percent by the end of September, as the Centre for Monitoring Indian Economy’s monthly report reveals that domestic steel majors are expected to hike prices even further in October.

The Centre for Monitoring Indian Economy (CMIE) “expect[s] steel companies to hike prices in October-November once industrial and infrastructure construction activity gathers pace, according to a PTI report. The CMIE noted in its monthly review that it expects finished steel prices to average 7 percent higher in 2012 than in 2010-11. However, the CMIE has sharply scaled down its growth forecast for finished steel production for the fiscal year from 12 percent down to 9.5 percent.

The CMIE is an independent economic think tank headquartered in Mumbai. It provides information solutions in the form of databases and research reports. The CMIE has built the largest database on the Indian economy and its companies.

Indian steel companies have last raised prices in May 2011 and since then, steel prices are almost stable even as the industry has seen episodes like the ban on illegal mining in Karnataka state and some price hikes in iron ore and coking coal. Market analysts believe that because of iron ore shortages, production is decreasing and rising demand by large steel markets like China can force the steelmakers to hike the prices.

Most of the leading steel makers have yet to announce the price rise, but we’ve learned that main players such as Steel Authority of India (SAIL), Tata Steel, JSW Steel and Essar Steel are likely to raise their prices. Analysts say that the companies may increase steel prices by $25-$30 per metric ton sometime in the last week of September.

Market observers say that proposed increased steel prices in India will affect the global steel market at this stage, but further increases in price will definitely affect the European and the US steel market.

Analysts say that the higher prices of coking coal and iron ore mining companies are charging will make steel much more expensive in the coming months. The recent ban of iron ore mining at Bellary in Karnataka state has already dampened the spirits of steel producers, because sooner or later supply shortages and higher iron ore prices will take their toll on the steel industry.

The Supreme Court of India recently banned iron ore mining in Karnataka’s Bellary, Tumkur and Chitradurga districts, following the recommendation of the Central Empowered Committee (CEC), which detected illegal iron ore mining in these districts.

All the steel companies are heavily dependent on the Bellary, Chitradurga and Tumkur districts for iron ore. The industry has already cut production due to iron ore shortages.

Coal imports are also a matter of worry for the steel mills because any rise in international coal prices will directly affect them; many steel producers currently import a large portion of their coking coal requirement.

Steel players have also invested in projects overseas to acquire mines in coal-rich countries such as Australia, Canada and Russia to secure supplies.

–TC Malhotra

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