Major domestic steel companies are planning to raise product prices by a whopping Rs 6,000 per tonne from January as an unprecedented rise in coking coal rates and weak retail sales due to demonetisation are hurting margins.
“Not just us, all domestic steel producers are planning to raise product prices from January. There is no option for us. Coking coal prices have gone to Rs 22,000 per tonne from Rs 7,000. The cost push is huge and we have to pass it on whether the market can absorb it or not,” Nitin Johari, director (finance) at Bhushan Steel told Business Standard.
Currently, the price of domestically produced hot-rolled coil stands at Rs 36,750 a tonne as on December 9. A Rs 6,000-a-tonne hike in product prices would be the biggest upward revision by steel producers since the government started taking measures to curb cheap imports in October 2015.
Sajjan Jindal-led JSW Steel, Essar Steel, Tata Steel, and Naveen Jindal-led Jindal Steel & Power, among others, are the major steel producing companies in the domestic market.
“Demonetisation has hit our retail sales by nearly 10 per cent since November 8,” said a JSW Steel source close to the development.
Bhushan Steel, on the other hand, has taken a hit of nearly 20 percent in November on its retail sales. “November onwards is usually the peak demand season but this time, our retail sales have not taken place as per expectations,” said Johari. “The impact of demonetisation could be one factor since consumers and retailers usually deal in cash. The OEMs business segment is also likely to take a hit as auto companies are expected to go on a longer shutdown of 20 days than normal 12-15 days due to demonetisation.”
While calls made to Tata Steel went unanswered, Essar Steel said its pricing will be in line with the market.
“Our prices will all be in line with the market,” said Vikram Amin, executive director at Essar Steel.
According to Joint Plant Committee data, domestic steel consumption in November rose 3.8 per cent from same period last year but was down 14.3 per cent from October. During April-November, the country's imports fell 40 per cent, while production for sale was up 10.3 per cent against the corresponding period last year. Consumption of steel in the period under review stood at 54 million tonnes, up three per cent from the same period last year.
Source:Busienss Standerd