Steel companies are set to shortly increase prices by Rs 2,000 a ton, industry sources said.
The increase in cold rolled products would be Rs 2,000 a ton and in long products, Rs 2,000-3,500 a ton, they averred.
Some of the primary producers have already intimated their customers that the new prices would be effective from March 1, while others are expected to follow suit shortly, sources said.
The first round of increase in a long while was initiated on February 4, a day before the government imposed a minimum import price (MIP). On February 5, the government had imposed an MIP of $341-$752 a ton on certain steel items, with the aim of halting cheaper imports that had landed the industry in dire straits. Between September and February, steel prices had dropped by around Rs 8,000 a ton, ex-plant. Capacity utilisation had dropped from around 80% to 72% and despite a safeguard duty of 20%.
According to a presentation by the Indian Steel Association to the government, as of September 2015, the sector accounted for 21% of the total number of corporate debt restructuring cases, of an aggregate of Rs 56,000 crore. The sector’s share in total stressed accounts of scheduled commercial banks is 10-11%.
Producers are now expecting the focus of the Union Budget on rural and infrastructure sectors to give a fillip to the demand for steel. “The large infrastructure outlay of Rs 2.21 lakh crore as proposed is expected to result in higher steel consumption. We hope much of that would be from domestically produced steel,” said Sanak Mishra, Secretary General, Indian Steel Association.
The Budget also has some dampeners for the industry. Mishra said the 100% increase in clean energy cess on coal would raise input cost for steel producers. Sources said at current coal prices, this cess of Rs 400 equated to approximately 7.5% and with an import duty of 2.5%, the effective tax on import of coking coal becomes 10%.
Coking coal accounts for half the raw material cost and steel producers have to rely mostly on imports, as Indian coal is of poor quality. Also, the duty-free export of iron ore (below 58% grade) might lead to higher domestic prices. This is also a major raw material for the steel industry, say producers.