India: Steel Inc volleys price hike issue back to govt

14 April 2007 | 06:42 Code : 13313 Geoscience events
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Indian steel producers have lobbed the price issue back into the government....
Indian steel producers have lobbed the price issue back into the government's court by claiming that they can hold the priceline for now only if the Centre cuts the price of iron ore in the domestic markets.The lobbying in the corridors of the Union steel ministry, sources said, is being led by JSW Steel, Ispat Industries and Essar Steel, which do not have access to captive mines.They depend largely on the public sector National Mineral Development Corporation (NMDC) and Orissa Mining Corporation for their requirement of iron ore.Steel ministry officials said several steelmakers have sought government intervention to reduce the price of iron ore by Rs 300 per tonne (which is equal to the export tax levied on the mineral in the Union Budget).Such a cut could result in Rs 600 crore savings for the steel sector and helps companies absorb rising input costs without having to revise steel prices upwards – as desired by the government to rein in inflationary pressures. International steel prices have risen and landed cost of imported steel is higher than domestic product by Rs 2500-3000 per tonne, the average headroom available for Indian producers to adjust their own domestic prices.Currently hot rolled (HR) coil is priced at around Rs 28,000 per tonne while that of CR (CR) coil is pegged at Rs 40,000 tonne.Steel company officials have conveyed to the ministry that the price situation will be reviewed in May and a final decision will be taken depending on whether cost of ore is brought down to enable producers maintain prices or adjust them to factor in rising costs.Steel companies are also lobbying hard to resist price increase effected by NMDC.The latter supplies 20 million tone of ore to domestic steel producers of its total capacity of 23 million tonne and proposes to increase ore prices to Rs 1,220 per tonne from Rs 1,114 per tonne.NMDC officials however point out that ore prices are not decided unilaterally by the corporation but based on a formula framed by the Centre. Y Sivasagar Rao, chairman and managing director of Vishakapatnam-based RINL said iron ore prices have gone up 9.5% in the last one year."So the Rs 300 per tonne export duty is fully justified and should in fact be increased to Rs 600. There is no reason why iron ore exports should continue," Rao told DNA Money in Hyderabad on Monday.Over the last three years, input prices for the steel industry have gone up by 100%, he pointed out. He says one-third of the profits of NMDC accrues from the higher prices that the steel industry is paying for the iron ore.In fact, this year, RINL alone will be paying an additional Rs 50 crore to NMDC.According to RINL director finance T K Bishnoi, the steel industry would meet to review the price situation in the next few days.

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