Friday, November 12,
Steel producers in Punjab’s steel city, Mandi Gobindgarh, who had booked advance orders for steel, find their margins squeezed as prices continue to grow upward but are forced to fulfill the commitments of orders already taken at low rates.
AL Aggarwal, president, Chandigarh Industrial Fasteners Association, said, “There was global increase in steel prices and the huge gap existed in demand and supply in view of revival of economic resurgence. Also, the prices of raw material coal and iron ore—has gone up in the past decade. The price of iron ore has gone up from $300 to $3,000 per tonne while that of coal has gone up from $50 per tonne to $250 per tonne directly affecting the price of steel.”
There are around 450 steel units in Mandi Gobindgarh producing nearly 25,000 tonne steel every day, or about 70% of the state’s total output. Ironically, however, steel production capacity has remained stagnant for sometime because till last week there was a complete ban on setting up of new steel units in Mandi Gobindgarh.
Even capacity expansion had been banned by the Union environment ministry, which had imposed a total moratorium on the industry because of some environmental issues.
To add to this, recently major steel producers in the country rolled back the concession of about Rs 1,000 per tonne being given to the secondary steel producers, leading to the price of MS Rounds shooting up to Rs 33,000 per tonne.
The price of steel ingot had shot up to Rs 28,800 per tonne and that of HR flats has shot up to Rs 32,700 per tonne. This had also led to hedging of steel by the traders, especially in Mandi Gobindgarh and Ludhiana.
As production is less than half of demand, import of steel especially from China stated in a big way. The steel imports during the first-quarter of 2010-11 fiscal (April-June) shot up by a hefty 117%.
Imported finished steel is cheaper by at least 10% as compared to the domestic steel, even after considering 5% import duty that is levied on all foreign-made steel.
Steel manufactures say firstly, it was rise in cost of raw material that led to squeezing of margins as they had already taken orders and then cheap imports from China. They want the Centre to immediately hike import duty to curb steel import so that domestic industry could be saved.
Source: The Financial Express
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