Steelmakers hike prices yet again

Producers of primary steel, major suppliers for the construction business, have taken yet another round of price hikes.

The latest hike — the third since January 1 — is as high as `500 per tonne and is expected to push up construction costs further over the next few months.

“Overall, the prices of long products have gone up by almost Rs1,750 per tonne since the beginning of the year,” said Chandresh Mehta, a leading steel trader in long products and director of Jenil Steel.

Mehta buys products from JSW Steel, SAIL, Tata Steel and Jindal Steel, among others.

He said construction demand has slowly started picking up, driven by the rural sector, but at the same time, input cost pressures have not eased. Therefore, the companies had to pass on the cost, said Mehta, but conceded that the hike was a bit too steep.

While the first two rounds of price increase were a reflection of increasing raw material costs and growing demand, the third and somewhatunwarranted increase is being attributed to a different reason.

“Historically, price of steel products produced by primary producers were always at a premium to secondary steel producers due to the brand name and quality that comes with a primary’s offering. But in the last few days, due to severe cost pressures on secondary players, their items had become dearer,” said another trader and an office-bearer of one of Mumbai’s prominent steel associations.

Primary producers are the ones which manufacture steel directly from ore and are usually bigger players such as JSW Steel, Tata Steel, Rashtriya Ispat Nigam Limited (RINL), SAIL and Essar Steel, while secondary producers are those which manufacture it usually from scrap and ingots. These players are comparatively small and have operations confined to a single city with very less production capacities.

“In the last few days, the price of secondary steel players w being quoted at close to Rs1,000 per tonne, costlier than primary players, and hence, a price hike was in the pipeline,” the trader said and predicted that soon yet another hike is likely to come.

While primary steel companies, which hold a lot of muscle power, have been comfortably passing on the cost to customers, the companies to bear the brunt would be from the construction sector that had been long praying for Indian infrastructure activity to pick up.