Biannual steel contract negotiations between steelmakers and auto manufacturers have begun with steel mills asking for INR 9,000 ($124) increase in flats and INR 7,000 ($97) in longs for H1 FY ’22, SteelMint learned from its credible sources. Steel mills are trying to close the negotiation with auto companies at the earliest for an increase in contract prices in the wake of a widening gap between spot and contract prices, however, the discussion is still underway.
Current domestic steel market scenario-
Major Indian steel manufacturers are planning to raise flat steel prices by up to INR 2,000-3,000/t ($27-41) following bullish trends in the global HRC market. Higher export realizations and absence of imports in the near future is likely to cause a steep hike in domestic prices. Recent offers to Vietnam stood at $810-815/t CFR and to Europe at $900/t CFR for May shipments. As of week thirteen of the CY ’21, SteelMint’s benchmark prices for 2.5 mm thickness HRC is in the range of INR 55,000-56,000/t (exy-Mumbai), up by around INR 1,500/t w-o-w basis. Traders have already raised the local prices ahead of official price announcement by major steel mills.
Previous price negotiation between steel mills and auto manufacturers-
The auto makers and steel mills had mutually accepted the prolonged negotiation for Jan-Mar ’21 quarter. Automakers had agreed to give an interim hike of INR 7,350/t ($101) in flats and INR 6,200 ($85) in longs to steel producers.
Past Contracts-
- H2 FY ’21-Oct ’20-Mar ’21-Price hike of around 12%
- H1 FY ’21-Mar ’20-Sep ’20-Prices rolled over
- H2 FY ’20-Oct ’19-Mar ’20-Prices decreased by 11-13%
Bullish demand from auto manufacturers in H1 FY ’22-
According to the data released by the Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales were at 281,380 units in Feb ’21 as compared to 238,622 units in Feb ’20, marking a growth of 17.92%. Commenting on the Feb ’21 data, Mr. Rajesh Menon, Director General, SIAM said “In Feb ’21, 2.81 Lakhs Passenger Vehicles were sold, clocking a CAGR growth of 3.29% over the previous highest sales in February, in the year 2018 of 2.55 Lakhs, while in February 2020 the total sales were 2.39 Lakhs.” The demand is likely to sustain for the coming months as the need for owned vehicles is likely to pick up on the back of surging covid-19 cases in the country.
To cash in on this demand, the automakers are pushing for record production to make up for the losses suffered during H1 FY ’21. For instance, Maruti Suzuki, India’s biggest car maker, plans to maintain a daily production run rate of more than 6,700 vehicles, which will take its total tally for FY ’22 to 2.4 million vehicles, the most in its nearly four decades of operations. Indian Automobile companies such as Hero Motocorp, Maruti Suzuki and Toyota Kirloskar Motor have also announced an increase in ex-showroom prices of their products from Apr ’21 onwards to offset substantial increase in input costs.
Leave a Reply