Steelmakers up prices, but continue to sell at old rates

Domestic steel companies have been toying with price hikes but are unable to make up their minds after a slew of negative news such as Standard & Poor’s downgrade of United States’ debt and faltering economies in Europe.

According to Mumbai-based traders, several steel companies increased the price of hot-rolled, or HR, products by around Rs500 per tonne on August 4, but later asked them to continue selling at old rates.

“There has been a Rs500 per tonne hike in price of HR coils and galvanised steel but not implemented so far. Within a week of hiking the price, the companies asked us to sell at old rates for the time being,” said Vinesh Mehta, a leading steel trader and president of the Bombay Iron and Steel Merchants’ Association.
While the domestic steel market had been reeling under high raw material costs and high interest rates, companies had to increase prices to retain margins.

Slacking demand, however, put paid to their price plans.
The head of a prominent galvanised steel company agreed HR prices were increased and rolled back within a span of a few days.

“Our prices depend on HR prices, but since they had been rolled back, we do not see any immediate price rise as of now,” he said, requesting he be not named.

Experts said the steel sector faces huge uncertainties, including the iron ore mining ban in Karnataka, the Lokayukta report indicting some top mining and steel companies, a slowdown in the construction, real estate and automotive sectors, and the recent turmoil in the developed world that is spurring talks of a double-dip recession in the US.

“There has been no official rollback of the August 4 hike. But my guess is a rate hike is inevitable,” said Bhavyesh Shah, director of a leading steel exporting firm in Mumbai.

He said all major companies including JSW Steel, Essar Steel, Tata Steel have upped their HR rates.

With the dollar weakening against the rupee, there is roughly a 2% export price parity which has made imports cheaper, so the price hike becomes a necessity, Shah said.

Mehta is not so sure when a hike can be implemented.

“For that, some confidence has to return to the markets,” he said.