JSW Steel, one of the major flat steel producers in India, has raised prices by INR 1,000/MT from January 2014 for all its products. The sudden hike in prices is owing to rising input costs. Company sources confirm that increasing cost of raw materials like Iron Ore, Scrap and Coke is one of the reasons for this price hike.
Reasons why JSW raised steel prices
Iron ore prices in Karnataka and Odisha have risen significantly in the past few months. The cost of procuring Iron ore from Karnataka e-auction is also very high. The state of Karnataka needs 35 MnT Iron ore whereas; the supply is only 15 MnT. JSW is finding it difficult to procure Pellets from Eastern region due to a shortfall. A price comparison of imported scrap, Iron ore lumps and Iron ore fines is shown below.
Rising Export Demand
Last month, JSW had reported a 78% rise in its output on y-o-y basis and it was bullish on the export market. JSW was able to seal bulk contracts from Europe and Middle East at prices ranging from USD 535-540/MT, which is much below its domestic prices. According to a senior executive, there has been a good demand in Middle East and Europe, particularly from infrastructure & utilities sector. Its products find wide applications in water pipelines and gas pipelines. Apart from Middle East & Europe, JSW is also optimistic for its growth in European and American market. JSW is expecting to export around 3 MnT of Steel this fiscal. As per our sources a recent consignment of about 45,000 MT of JSW Steel coils moved from Goa port to Antwerp and a previous consignment of 25,000 MT moved to Spain. This is in close conformity for JSW, aggressively sticking to its export target for this year. Industry experts also view that as Korea and Japan have raised their international offers for flat products, it will help Indian manufacturers to raise their international export offers as well.
Domestic Demand
Domestic demand for flat steel has remained quiet and Imports are not feasible at this point. This has given JSW some room to increase domestic prices amid a lull demand. However, JSW expects slight improvement in domestic demand mainly from rural sector. The management is “cautiously optimistic” on any improvements in domestic demand.
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