Auto majors eye alloy steel cos

Domestic automobile, component and tractor makers may pick up a strategic stake in alloy steel firms to protect themselves from the high volatility in prices and ensure assured supplies in future.

The price of alloy steel has surged by Rs 5,500 per tonne during January-April 2004.

The auto companies are also likely to jointly approach financial institutions to facilitate allocation of loans to alloy steel companies, an official at the Society of Indian Automobile Manufacturers said.

These issues would be discussed by a 16-member committee, comprising four members each from SIAM, the Automotive Component Manufacturers Association, the Tractor Manufacturers Association and the Alloy Steel Producers Association.

This followed a meeting last week between the four industry associations, which was attended by representatives from auto majors like Maruti Udyog, Bajaj Auto, Mahindra and Mahindra, Eicher and Honda Motorcycle and Scooter India. The ASPA members present included Kalyani Steels, Usha Martin, Vardhaman Steel, Marmagao Steel and Aarti Steels.

The alloy steel producers have cited shortage of metallurgical coke, coal and scrap iron for the rise in prices of the material, the SIAM official said.

The scarcity of coal and metcoke has also affected hot rolled coil producers like Steel Authority of India Ltd, Tata Iron and Steel Company, Essar Steel, Jindal Vijaynagar Steel Ltd and Ispat Industries.

These companies have also increased their prices, which has led end users like car, motorcycle, bicycle and pipe companies to jack up their product prices.

The committee would also look into the expected demand and supply of alloy steel over the next 5 years and ways to bring about greater price stability, he added.

The vehicle and component makers pointed out the cost pressure on their operations due to the high prices of steel. The original equipment makers said that if the current scarcity of forge and alloy steel continues, the situation could worsen in the coming years as the domestic automobile industry has been growing at 10-15 per cent per year.

These firms were therefore planning to facilitate allocation of fresh loans to the ASPA member companies by financial institutions so that they could invest in expansion of capacity.