July 2, 2008

Steel Prices Continue to Rise

By Shishir Arya

NAGPUR: Steel continues to be on the boil, with the rates of flat products surpassing the Rs 50,000 mark. Flat steel, raw material for consumer durables, is ruling in the range of Rs 52,000-53,000 per tonne, an increase of at least Rs 4,000 a tonne within a week. Trade sources say that the rates are also being quoted as high as Rs 55,000 a tonne in some places.

One of the key reasons for the rates hike is supply constraints followed flooding of iron ore mines in Jharkhand and Orissa. "The three month period till when the government had announced to keep steel rates constant has ended on Monday (June 30). A major jump in the rates was also due to this reason," said secretary of Vidarbha Steel and Hardware Chamber Krishna Rathi. With government companies being a major supplier, its price position has a deciding impact on the market, he said.

Flat products are among the costliest of steel products used for making casings for the electronic products like microwaves, washing machines and so on. However, makers of these products passing on the price hike to the consumers depends on a slew of factors.

Though consumed in mass quantity, its value in money terms is less as compared to other materials as a result there are lesser chances of the price rise being passed on to the buyers, say traders.

Apart from consumer durables, flat steel is also used substantially in infrastructure projects, and the rise in prices may lead to a resultant escalation, feel market observers. Products like sheets and plates, angles are costing in the range of Rs 46,000- 47,000 a tonne. "While the price of TMT bars used for construction is also just a little below Rs 50,000 mark," Rathi said.

However, even though iron ore supply remains to be a problem, the commodity's prices have remained constant at Rs 6,000 a tonne, while that of sponge iron has touched Rs 27,000 which is a hike of around Rs 4,000 in a week's time. Iron ore is processed into sponge iron after which it is used to make steel, explained Rathi.

Dipen Agrawal, former president of steel chamber, says, "Things are out of the government's control. Moreover, there are a number of factors such as international demand and shortage of raw material which are fuelling price rise."

President of Vidarbha Industries Association (VIA), Mohan Agrawal, blamed it to widespread speculative trade in steel products and raw material like sponge iron, billets and so on. Once controlled, this may bring down the rates substantially, he opined.

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