It was only in January this year that some of India’s major steelmakers had increased the price of their products. Now they have done it again, blaming it on the Indian rupee weakening against the US dollar, and on the increase in raw material price.
All this even as India’s steel minister goes about making claims of a soon-to-come blueprint to make India produce 300 million metric tons of steel by 2025.
Indian steel companies, as consistently reported by MetalMiner, have been suffering from an iron ore shortage, forcing steel companies to import this raw material, adding unnecessary stress to their bottom lines.
Increasing input costs have thus forced steel companies including JSW Steel, Steel Authority of India (SAIL) and Essar Steel to raise prices by about US $8-16 (Rs 500-1,200) a ton for the second time this year, according to a report in the Business Standard.
In fact, as reported by MetalMiner at the start of the year, JSW was first off the block, hiking rates by about US $16 per ton, around 2 percent across the board for January.
Now, according to the news report, the company, along with others such as Essar Steel, had gone in for a hike for a second time.
Even government-owned SAIL has marked up prices between US $6-8 (Rs 300-500) a ton. Others, such as Jindal Steel Power Limited, were expected to follow.
The report quoted JSW Steel Director of Commercial and Marketing Jayant Acharya as saying his company was going in for the rise due to rising input costs from shortages of ore. The supply of ore has come down lately, not only from Karnataka but also from others like Odisha. The costs of sourcing have risen about US $144 (Rs 9,000 a ton).
Iron Ore Import Relief?
There seems to be some relief coming soon, if a report by India Ratings & Research is worth something. It stated the availability of iron ore should improve in the next fiscal year. But any further rupee depreciation, resulting in an increase in the landed cost of coking coal (which is mostly imported), could contract profitability margins.
The Government of India, though, says its hands are tied as far as the supply of ore is concerned due to it being a legal issue. But Steel Minister Beni Prasad Verma is gung-ho about a blueprint he says is being drawn up to expand India’s steel capacity to 300 million tons. He told the annual meeting of Steel Consumers’ Council that the roadmap was being prepared.
India’s steel capacity stands at 96 million tons per year currently, and most analysts have written off the 300-million-ton target as “fanciful thinking.”
But the Minister is adamant that it’s not an impossible task. In an official press release issued by the Ministry, he said, “Ten steel factories are to be set up” as part of this growth plan.
“India is today the 4th largest steel producer in the world and the second best in terms of growth rate amongst top 10 steel producing countries,” he claimed.
India became a net exporter of steel during the April–December 2013 period.
In a tacit reference to the ongoing ore shortage, the minister did tell the meeting that the need for raw material securitization, efficient and cost-effective logistics, as well as adoption of advanced technologies of steelmaking were some of the challenges the sector faced.
by Sohrab Darabshaw