While the spot prices being flat
with a downward bias from the last couple of quarters, steel companies in India
are planning to increase long-term contract prices for the January-March 2012
quarter by Rs 1,000 to 1,500.
“The fundamentals for the sector
continue to be weak and steel companies have cut production partially due to
non-availability of iron ore and also due to weak demand. The price increase is
mainly on account of rupee depreciation. Current domestic prices when converted
to dollar equivalent are lower by around $20-30 per tonne compared to
international prices. So there is still room for a price increase in the
domestic market,” said Ankit Miglani, deputy-managing director at Uttam Galva Steel.
He forecasts a Rs 1,000-1,500 per tonne, price hike for quarterly and semi-annual
steel contracts negotiated with high volume institutional customers. A senior
official from JSW Steel also said that long-term contract prices for the metal
are expected to increase by $10-20 (Rs 536-1072) per tonne. The falling value
of the rupee against the greenback has increased costs of imported raw materials
such as coal hurting its profit margins.
An Essar Steel spokesperson
said, “We have a positive outlook on long-term contract prices and it is likely
to go up.”
However, according to analyst, the
sustainability of price hikes for the quarterly/semi-annual contracts depends
on how demand and prices move globally. At present there is an over-supply situation
in the market forcing most of the companies to cut production.
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