Local Indian local hot rolled coil (HRC) prices have surged after year-end base price hikes by producers and reports of premiums surging in key markets like the west around Mumbai, but trading activity has remained low amid a combination of year-end holidays and the increasing face-off between producers and user industries as regards high prices, SteelOrbis has learned on Monday, January 4.
Sources said that base HRC prices have been maintained at INR 51,000-52,000/mt ($698-711/mt) ex-works with reports in the market indicating some trades around Mumbai in the west also being concluded as high as INR 55,000/mt ($752/mt) ex-works inclusive of premiums as higher-volume bookings were limited and the market has been rife with anticipation that producers will go in for a further increase in base prices later this month.
At least two leading Mumbai-based traders said that domestic integrated steel mills are expected to increase base prices in January by at least INR 1,500/mt ($20/mt), for the fourth time over the past two months, but the number of trades over the past week declined as several market participants have been wary of uncertainties with both producers and user industries stepping up lobbying with the government for and against the sustained price rise of finished steel products.
“Steel prices are going up in India in line with global trends. Our costs have gone up as iron ore prices have increased,” V R Sharma, managing director, Jindal Steel and Power Limited (JSPL), said. “Steel companies have been carrying losses on their books for many years and this high price will enable us to offset such losses. Profit is not bad and even the government earns more money through higher net collections of Goods and Service Tax (GST) at ad valorem rates. In an open economy, no one can say how much profit a company can make. The government can punish us if there are unfair trade practices like hoarding or cartelization,” he added.
However, a section of the market maintains that, with user industries across representative associations and even ministries in charge of user industries flaying higher steel prices for triggering sharp project cost escalations, government intervention is most likely and it is possible that government-run producers like Steel Authority of India Limited (SAIL) and Rashtriya Ispat Nigam Limited (RINL) could be directed to take the lead in cooling down the market.
The uncertainties over possible base price hikes or government intervention are causing a number of user industry segments to defer entering the market with large-volume transactions until such time the government makes its move, two traders said.
$1 = INR 73.11
