Auto contracts for the first quarter (Apr-Jun ’21), which had run into controversy, are likely to be closed by month-end, ending months of speculation.
A leading mill informed that most of the contracts have been finalised for long products at around INR 5,950/tonne(t) while negotiations are on in flats.
SteelMint has learnt from reliable sources that a leading two-and three-wheeler manufacturer closed the longs contracts at around INR 6,900/t a month back. The source said that the rates here are slightly higher since these were closed a bit earlier compared to the other players.
Another major two-wheeler manufacturer has closed the deals in flats at INR 7,500/t for HRCs and INR 9,500-9,800/t for CRCs.
Vardhman Special Steels, which has Maruti Suzuki, Hyundai, General Motors and Bajaj Auto as some of its clients, has informed bourses that “price negotiations for the first quarter with our OEMs have been completed. The price increase is between INR 5,000-INR 6,000/t.”
Deal prices marginally lower
These deals put to rest months of speculation. It may be recalled that mills and auto original equipment manufacturers (OEMs) were at the negotiating table for almost a full quarter. The mills had sought INR 10,000-11,000/tonne increase in their offers to the auto makers for the Apr-Jun ’21 quarter on a pro rata basis.
Several automakers, on their part, had said the hike sought “was too steep”, “not justified” and “unreasonable”.
The mills had last negotiated an interim hike of around INR 7,500/tonne on their bi-annual contracts for the quarter ending Mar ’21. In Apr ’21, the mills again sought an increase in the contract prices by INR 6,000-8,000/tonne under the existing agreements. However, this had pertained only to long alloy steels required in auto.
The prices arrived at seem to be marginally lower than that demanded by the mills. However, a steel industry source said that reducing prices is difficult since raw material prices have gone up. “Iron ore, ferro alloys, coke prices have shot up,” the source reasoned.
Past contracts:
- Q4 FY21 an interim hike of INR 7,350/t ($102)in flats and INR 6,200/t ($86)
- H2 FY21-Oct ’20-Mar ’21 – Price hike of around 12%
- H1 FY21-Mar ’20-Sep ’20-Prices rolled over
- H2 FY20-Oct ’19-Mar ’20-Prices decreased by 11-13%
~Madhumita Mookerji
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