Local Indian hot rolled coil (HRC) prices have showed an upward bias during the past week, gaining INR 200/mt ($2/mt) to around INR 41,000/mt ($680/mt) ex-works, as the market has been getting ready for higher-than-expected price hikes by steel mills, traders said on Monday, July 14.
According to a Mumbai-based trader, local steel mills have delayed announcing a price increase during the current month and the market now fears that the hike will be more than the expected INR 1,000/mt ($16/mt).
Local steel mills will now have to factor in the higher cost of imported coking coal forced on them by the Indian government, the trader said.
Last week, the Indian government increased the duty on imported coking coal to 2.5 percent through the federal budget, up from the previous zero rate.
"The increase in import duty on coking coal is unfortunate considering there is a shortage in domestic supplies and high import dependency of local steel mills," an official at JSW Steel said.
"The higher customs duty is expected to increase the cost of production by about INR 200/mt ($2/mt)," he added.
Market sources said that local steel mills are re-evaluating the planned price hike to pass on the higher cost of production to buyers.
A section of the traders, however, said that local steel mills would have to limit the price hike and not pass on the entire increase in the cost of production to the market since demand and volumes of flat products have not shown any revival following the government's budget brought before parliament last week.