Faced with the spectre of input costs of raw materials like iron ore shooting up by Rs 2,500 per tonne, major Indian steel makers are finalising plans to hike steel prices within next ten days to offset increased costs of production.
“Indian steel companies are facing increase in input costs of about Rs 2,500 on per tonne of steel produced from April next, owing to rise in prices of iron ore, coke and power charges, an Indian Steel Alliance (ISA) official told media.
“Some companies like Essar and Ispat, which do not have the advantage of captive raw material would be forced to increase steel prices from April to recover the increase in input costs,” he said.
With the global iron ore benchmark contract prices being settled with an increase of about 10 per cent for 2007, Indian ore producers too have decided to follow suit to affect a similar hike from next month.
“This will have an impact of about Rs 400 per tonne of steel produced with Indian lump ore priced at around Rs 2,400 per tonne,” he pointed out.
Similarly, prices of scrap and sponge iron, two other major inputs for steel making, has shot up by $10 to $15 per tonne, leading an impact of about Rs 700 per tonne on steel produced.
“Scrap prices are prevailing at an all-time-high of 400 dollars per tonne in India while hot briquette iron was $380 per tonne for deliveries to Indian ports,” the official cited.
“Low ash metallurgical coke prices imported from China have also seen a $15 increase since past one month leading to a landed cost of $240 per tonne for April deliveries. This will add another Rs 400-500 per tonne impact on cost of production,” he said.
International steel majors have announced price increases for April deliveries by $50 per tonne, mainly to offset increase in input costs on key steel making raw materials like iron ore, scrap and coke.
Logistics cost, mainly on account of freight has also shot up by $5 per tonne leading to another increase of input costs by Rs 550 per tonne, he said.
“To add to the woes of the steel companies, electricity tariff revision to about 75 paise per unit would add upto another Rs 500-600 for every tonne of steel produced,” the official pointed out.
Source: The Economic Times