Harried JSW ups prices, rivals quickly follow ...

JSW Steel, the country’s biggest private sector steel producer left gasping in the iron ore maelstrom, on Monday cut production by a massive 70% at its Vijayanagar, Karnataka plant.

Even as it scrambles for raw material, the company made a daring gambit to mitigate some pain.

“JSW Steel told us it has increased prices of galvanised products by `750 per tonne with immediate effect,” said Vinesh Mehta, a prominent trader and president of the Bombay Iron Merchants Association.

Mehta said within minutes of JSW Steel announcing the hike, Essar Steel and Uttam Galva followed suit.

While Uttam Galva increased prices by Rs1,000 per tonne for galvanised coils, Essar Steel hiked price by Rs1,500 per tonne for HR coils and Rs1,000 per tonne for galvanised coils.

Besides, JSW has also informed traders it could go for another hike in the first week of October.

A source close to one of these companies said demand remains very weak and the festive season is not offering any promise, but macro and currency economics have dealt a fell blow.

“A depreciating rupee has made coking coal, another major raw material for steel making, unaffordable,” said the source.

In the last three months, while iron ore prices have increased by 4%, prices of coal have fallen by a similar amount.

But while iron ore is procured domestically, coking coal is sourced from countries such as Australia.

The fall in coal price, unfortunately, has been offset by the over 10% depreciation in the rupee - importers have to pay more rupees for the same amount of coal.

Another trader, who did not wish to be named, said for this very reason, steelmakers are focusing more on exports.   

But the price hike left analysts scratching their head.

“It doesn’t make sense at all. There’s little demand, there are no triggers. Also, raw material prices haven’t gone up sharply after prices were hiked in August,” said an analyst with a leading international brokerage, who did not wish to be named.

Even in case of galvanised coils which employs the use of zinc, the analyst said, while in the last one week, rupee has depreciated 15% against dollar, zinc has corrected to Rs1,800 per tonne from Rs 2,300 per tonne — that is, a correction of 20% in the last two weeks.

Therefore hiking price of galvanised coils by `1,000-1,500 per tonne doesn’t make sense, he said.