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Biting the bullet of lower customs duty, Indian steel producers will hike prices selectively on Thursday, anticipating a demand push by the budget and emboldened by lower production and rising prices in China.
The price increase of Rs 1,500-2,000 per tonne on hot rolled (HR) coils will be the first hike in steel prices in the last six months. According to a PTI report, Tata Steel and JSW Steel have already announced the price increase, effective from Thursday.
The prices of long products will also go up by Rs 700-1,000 a tonne.
Most integrated steel producers like Tata Steel, Steel Authority of India Ltd (SAIL), Ispat Industries Ltd and JSW Steel Ltd held day-long meeting of their pricing committee. Sources said that most producers were very cautious on the new pricing strategy, unsure as they are of the market's ability in absorbing a higher price and also the rather tentative recovery of international prices.
Hence, prices of hot rolled (HR) coils would be increased by producers by Rs 1,500-2,000 per tonne, depending on various grades, but prices of cold rolled (CR) prices would be maintained.
Sources in Tata Steel and SAIL said that prices of CR coils were already too high and since a differential had to be maintained between HR and CR, the prices of the latter will remain the same. JSW Steel Ltd, too, would raise prices of HR coils by a similar amount.
"We have seen a recovery in demand across the Asian region and expect prices to remain buoyant," T Mukherjee, deputy managing director, Tata Steel, said.
"Also, Chinese companies will maintain prices since they suffered huge losses in the last quarter from rising cost," Mukherjee said.
"This is basically opportunistic pricing. Domestic demand is firm and production has been lower in China because of the New Year there. Chinese export price, too, has moved up.
So too have prices in North America and Europe. Indian producers are taking advantage of short-term spikes in steel prices," said an official in Tata Steel.
However, the quantum of the current hike may have been capped by the budget, which cut customs duty on alloy steel to 7.5% from 10% and maintained duty on primary steel at 5%, despite pleas of a hike from the producers. In the current fiscal, imports of flat steel was up by 90%, at around 3.12 million tonnes.
Domestic integrated steel producers like Tata Steel and SAIL reckon that the excise duty cut on small cars to 16%, and the large budget allocation for the infrastructure sector would fuel a higher demand for steel.
While steel prices have firmed up, aluminium firm Hindalco has cut prices by Rs 5,000 per tonne. The budget has proposed to reduce customs duty on primary and secondary non-ferrous metals like aluminium from 10 per cent to 7.5 per cent.