Leading steel manufacturers SAIL and Essar Steel on Friday refuted the charges of 'cartelisation' and 'unfair trade practices', levelled by ancillary steel producers, by attributing steep hike in HR Coil prices to sky-rocketing raw material costs.
"We strongly refute the insinuation that SAIL is party to any cartelisation. We at SAIL decide our own pricing and marketing policy," a SAIL spokesperson said.
He said the prices of coking coal have seen a quantum jump during the financial year 2010-11 from a level of $128 per tonne in the beginning of the financial year to $330 per tonne prevailing at present.
"To produce one tonne of crude steel we require one tonne of coking coal. It can be seen that prices of coking coal have jumped by two-and-a-half times," he said.
Echoing similar views, an Essar Steel spokesperson said, "Input costs for steel making have gone up steeply over the last six months. While steel companies have absorbed costs as much as possible, they are left with little option but to increase steel prices."
The ancillary steel producers had accused four leading steel makers - SAIL, Tata Steel, JSW and Essar Steel, of indulging into unfair trade practices by forming a cartel on prices of HR Coil and threatened to lodge a complain with the Competition Commission of India.
The four companies together produce about 20 million tonnes per annum (MTPA) HR Coil, a type of steel, which is further processed into finished products like pipes, vessels, containers, tail boards for goods vehicles, shipbuilding etc by the end-manufacturers or ancillary steel makers.
"Since December, SAIL has increased the prices of HR Coil seven times by about Rs 9,000 per tonne and the same is true for other producers like Tata Steel, JSW and Essar Steel, whose increase has also been in the same range," said D P Jindal, the Chairman of D P Jindal group, which is into the business of making steel pipes and tubes among others.
Expressing similar sentiments, Goodluck Steel Tubes' Chairman M C Garg said, "They always hike prices in tandem and in a similar range. Currently, the international prices for Hot Rolled Coil (HR Coil) are around $ 730 per tonne, while here it is about $ 865 per tonne."
According to the Federation of Industries of India (FII) - the industry body of ancillary steel producers - SAIL increased HR Coil prices by Rs 4,500 per tonne in a span of one week only (between February 1 to February 7).
However, an industry source said, "Steel prices have not kept pace with increase in input costs and domestic producers have hiked the prices of HR Coil by 20 per cent only in last one year against an average increase of 26 per cent in raw material prices."
Prices of iron ore fines in international markets, which were trading at $144 per tonne in March, 2010, have gone up by 25 per cent to about $180 per tonne, the source said.
He added that during the similar period, the coking coal prices have increased by 37 per cent from the levels of $218/tonne in March, 2010 to current levels of $300 per tonne.
"This is putting pressure on the margins of steel companies which is evident from the financial performance of steel companies," the source said, adding that SAIL's profit dropped by about 34 per cent in the third quarter due to sky-rocketing raw material prices.
Moreover, adding to the woes of primary steel makers, the recent floods in Australia pushed up coking coal prices further and it is yet to stabilise, he said. Ancillary steel makers could not be reached for comments on the issue.
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