Essar Steel, one of the largest suppliers to the sector is expected
to increase prices from the September-end. The price hike may add to the automakers' woes who are facing a slowdown in sales this year
While the Tata Nano, for which Essar is a major supplier of
steel, may find it tough to be cost-competitive on low volumes, nearly all
carmakers, including Maruti Suzuki and Hyundai, are likely to face margin
pressure. A Tata Motors official declined to comment.
“The (steel) contracts are on till end-September, so the new
prices will be effective from October. The negotiations will happen through
September and the price rise will depend on the individual contracts with the
automaker,†said Mr Vikram Amin, Essar Steel's Executive Director for Strategy
and Business Development,.
Around 20 per cent of Essar Steel's supply is to automakers,
based on quarterly or half-yearly contracts. The company meets about 35 per
cent of the overall steel demand of the domestic auto industry.
The scheduled increase in steel prices follows a rise in
production costs for Essar Steel after it was forced to change its energy
(natural gas) supplier to Shell's Hazira LNG terminal from Reliance's KG-D6
basin.
In May, Reliance was mandated by the Ministry of Petroleum
and Natural Gas to stop supply of KG-D6 gas to non-priority consumers.
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