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Steel prices up 8 pc on cut in Chinese production

This is the second consecutive month when steel prices have been hiked. The quantum of the hike at Rs 2,000-Rs 2,500 per tonne indicates a persisting demand-supply gap, reports Suman Layak.

business Updated: Feb 01, 2008 20:43 IST
Suman Layak
Suman Layak
Hindustan Times

Major Indian steel producers announced an 8 per cent hike in steel prices on Friday pointing towards a period of higher prices. The move comes amid reports on Chinese steel industry website that more than 50 Chinese steel producers were cutting their output due to frequent power cuts.

This is the second consecutive month when steel prices have been hiked. The quantum of the hike at Rs 2,000-Rs 2,500 per tonne is seen as a bold move by steel makers and indicates a persisting demand-supply gap.

Ankit Miglani, director commercial, Uttam Galva Steel, said: “The next two quarters will be good time for the steel industry. The prices are likely to go up further.” Uttam Galva, JSW Steel, Essar Steel, Tata Steel and Ispat Industries have all hiked prices, industry sources said.

The immediate reason being offered by most steel makers is the hike in iron ore prices by the National Mineral Development Corporation (NMDC) with retrospective effect from October 1, 2007. NMDC could hike ore prices again in April 2008, sources said.

International steel prices have gone up too. The landed price of imported steel is around $720-750 (Rs 28,800-Rs 30,000) per tonne. The freight cost has also moved up sharply in the last few months, from around $200 a tonne to $450 a tonne. These increases provide Indian producers enough cushion to hike prices.

The January-February period is usually a high demand period as companies reduce their stocks in December for the financial year end and re-build their inventories again in January and February. This year, lower production in China has also been factored in. Steel mills in China have been hit by shortage of power with demand soaring in one of China's harshest winters this year.

The supply shortage and the normal increase in demand have created a comfortable situation for the steel makers to raise their prices in India. An industry source said: “If iron ore prices are hiked again in April it will lead to a further increase in steel prices.”