Tuesday, April 12,
Contract prices of iron ore and coal for the April-June quarter have risen sharply, but steelmakers are finding it difficult to pass on the rise in costs, due to a weakdemand for steel products..*
The long-term contract price for coal is 46% higher than that in the previous quarter while that of iron ore is 10% higher, making it difficult for steel companies to absorb the rise in costs.
Coal and iron ore together account for almost three-fourth of the total cost of steelmaking.
The impact is less for companies like Tata Steel and the state-owned SAIL that have their own iron ore mines and partial ownership of coal. However, private companies such as JSW Steel and Essar Steel, which typically buy resources from the open market, would find it difficult to absorb the price hike.
The average price of hot rolled coils, which is used in consumer goods and cars is at 38,000 a tonne.
The weak demand is mainly due to a tight liquidity situation as banks are reluctant to lend to the steel retail trade. The demand from original equipment manufacturers is however strong. The composition of retail as part of total sales varies.
Source: The Economic Times
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