State-owned Rashtriya Ispat Nigam Limited (RINL) is lately focusing on a premium-based strategy in both retail and project sales in a shift from the discounting norm followed so far in a dull pre-Covid market.
Reliable sources informed SteelMint that only in specific retail cases zonal in-charges have been verbally informed they can take the decision to effect price revisions upwards till INR 1,000 per tonne over the list price. However, this decision can be taken only in certain instances.
First, where there is shortage of the material in a particular region, secondly, if RINL’s competitor does not have the product required, third, where there urgency to deliver within say 2-7 days since the customer does not have adequate inventory. “In such cases, the zonal in-charges can make small price correction and charge a premium of INR 500-INR 1,000 per tonne,” the source informed, adding, “Only in instances where it is not possible to increase prices from the central level of the company, this is being effected.”
The zonal in-charges have not been sent any circular to this effect but have been informed verbally to use their discretion in charging this premium.
That apart, in project sales which take time for deals to get finalised or almost two months are taken to confirm a price quotation, RINL is charging a premium of up to INR 2,000/tonne to take care of likely future price fluctuations.
Market supports premium sources informed that this policy for both retail and project sales has been in existence for a couple of years now but all this while the market had not supported it. Now, the steel major can implement this policy since prices are increasing thanks to both high input costs and domestic demand.
Price hikes
RINL, on its part, to combat the rising iron ore prices, effected two price hikes, totalling INR 5,550/t in December, alone. The first, of INR 3,000/t was implemented on the first of the current month and the second hike, of INR 2,500/t on December 7. Post-this, its rebar prices are hovering around INR 49,500/t and wire rods, at around INR 49,000/t, plus GST.
The premiums can be charged over and above these above prices. “It can do so because the market is very bullish at present. Demand is exceeding supply,” said a source.
RINL has a target to sell 1.70-1.80 lakh tonnes of rebars every month. But how long will the market support premium pricing? As long as iron ore prices stay high, said sources. The whole sale price index (WPI) of the last 20 years show iron ore prices ranged around USD 100-110/t but which have shot up to USD 150/tonne.
Plus, the auctioned mines in Odisha have not yet resumed production, leading to supply shortage of the raw material. Both factors have created a case for steel prices to stay northward for some time
— by Madhumita Mookerji
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