News Room - Steel Industry

Posted on 04 Feb 2008

Steel price hike as input costs shoots up

All big steel companies including Tata Steel, Essar Steel, JSW Steel, state-owned Steel Authority of India (SAIL), Ispat Industries and Uttam Galva on Friday announced hike in steel prices ranging from Rs 2,000 to Rs 2,500 per tonne. This round of hike makes price of hot rolled steel around Rs 28,000 a tonne and that of cold rolled steel around Rs 38,000 a tonne.

The rise, which the companies had to offset the higher costs of raw materials such as coal, coke and iron ore, will come into immediate effect. The cost of iron ore and coking coal, the key ingredients for making steel, have gone up by nearly 22% this year and are expected to rise further.

India's largest and world's sixth largest steel maker Tata Steel has hiked hot and cold rolled coil and galvanised steel prices in the range of Rs 2,000-2,500 per tonne. Similarly, Essar Steel, a part of the Essar group, has raised prices across all categories by around Rs 2,100-2,300 per tonne. JSW Steel, SAIL, and Ispat Industries, Uttam Galva have also confirmed price hike in the same range.

Globally, steel prices are likely to increase in most markets this year, with tight raw material markets leading to margin compression for producers who do not control their sources. The prices of the raw material increased by 300% in the last three years, however gross margin of iron ore produces increased from a little over 20% in 2003 to over 45% in 2006.

In December, domestic mining giant National Mineral Development (NMDC) has raised long-term contract prices of iron ore fines by 47.5%, bringing the price to Rs 1,783 per tonnes. Galloping raw material costs including coal and iron ore eat into the margins and hit the bottomlines of steel producers, making their demand for captive ore mines even stronger. On the back of a rapidly growing economy, steel demand in India is likely to go up by 7% in calendar 2008.