SteelMint in discussion with market participants assessed that the announcement of reduction in VAT (Value Added Tax) in Punjab has led Finish & Semi Finish Steel purchases to a standstill.

Few producers of Finish Long (TMT) based in Mandi Gobindgarh and NCR Region are reluctant to place their Ingot/Billet purchase orders owing to new VAT imposition. Based on a recent announcement, VAT will be reduced from 5% to 2.5% w.e.f. 1 Feb, 2014. Now, manufacturers of Re-bars, Structures and other finished material are trapped with their old stock as buyers are not interested to pay 5% VAT. Possibly, new orders will be placed only around 1^st Feb.

A manufacturer based in Mandi says,

“Sales of finish steel may not continue at the same levels in coming days. If we purchase the raw material anytime by January end at 5% VAT then we might have to bear huge losses on sale of that material in February (owing to reduced VAT of 2.5%). As such a hand to mouth approach is followed while purchasing Ingot/Billet in order to maintain the cash flow.”

Ingot in Mandi Gobindgarh has experienced price corrections of INR 200-400/MT in the last couple of days. In effect, a price fall was witnessed in other major markets like Raipur, Raigarh, Rourkela & Durgapur; down by INR 100-200/MT during the same period. However, buying sentiment remained firm.

[su_quote cite=”A Re-bar manufacturer based in Raipur (Central India)”]There is no major correction in Finished Steel prices as the sale remains constant over the last 2-3 days. While, reduction in Ingot offers in Mandi Gobindgarh is hurting our sales sentiments, and that is not correct.[/su_quote]