India's JSW Steel mulls price surcharge

Monday, 25 October 2021 17:03:04 (GMT+3)   |   Brescia

India's JSW Steel may introduce a price surcharge to cope with the strong increase in its production costs.

Prices of coking coal, for example, have risen within a short time from $110/mt to $400/mt. Steel companies, which sign monthly contracts with their customers (especially original equipment manufacturers (OEMs)), are finding it difficult to pass on these increases, said Seshagiri Rao, joint managing director and CFO of JSW Steel, in a recent interview in the Economic Times and BusinessLine.

"Going forward, if you ask me what is required to be done, coking coal prices have gone up so much that it is very difficult for steel companies to absorb. We may also have to think of passing on some energy surcharge to customers," Mr. Rao stated.

JSW Steel may follow the example of some European steel companies, which in the past year have introduced carbon surcharges and energy surcharges for their products. The Indian group is consulting with customers on how to implement this pricing mechanism, which would be maintained until the cost of energy returns to normal levels.

The surge in coking coal prices is due to supply being redirected. Previously, China bought directly from Australia, while now it sources from the United States, Canada and Europe, while Australia, in turn, sells to Europe and the United States.

JSW predicts that concerns related to rising logistical costs will lessen as vaccination programs advance around the world and Covid restrictions are eased. Ships delivery times should therefore be reduced and the risk of a further increase in transport costs should be avoided. At the same time, as demand remains buoyant, the upward trend of steel prices will continue, Rao said.

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