The recent freight rate hike announced by railways and the increase in excise duty from 10% to 12% are likely to make domestic steel costlier by over R1,000 per tonne.
Major steel companies including Jindal Steel and Power (JSPL), Essar and Rashtriya Ispat Nigam (RINL) on Wednesday announced their plans to go for a price hike next month.
?The increase would be mainly on account of hike in railway freight rate. The cost of operations has gone up by R1,000 per tonne, this would be passed on to the consumer,? V R Sharma, chief executive officer and deputy managing director of JSPL, said on the sidelines of a conference organised by the steelguru.
Essar Steel is looking at the similar hike in the steel prices. ?The increased duty and iron ore freight rates has pushed up the cost by R1,000 per tonne, that is why the price hike will not be less than that. This will get reflected (in prices) by the end of this month,? Dilip Oomen, CMD, Essar Steel (India), said.
The increase is expected in both flat steel used for induastrial use and long steel used for construction.
The government has hiked the excise duty on steel by 2%. The railways have also increased on domestic transportation of iron ore by 10%. Though, the move will help railways to meet its freight earning targets that have been severely hit due to ban on exports in Karnataka and Orissa, it would have an impact on the overall costing of the steelmakers as well.
Steel prices at present are at R36,000-37,000 per tonne. The price hike would be mainly in long product. The companies are expecting the demand of steel to pick up, especially in the construction sector.
Companies like JSW and RINL, though, yet to take a call on price hike, gave an indication that the price would certainly go up. ?We can absorb the impact to a limited extent. In a month, cost has increased significantly due to policy changes. This will get reflected in next month?s price but we have not yet decided on extent of hike,? AP Choudhary, chairman, RINL said.
Similarly, a JSW official said that ?it (price hike) is on the drawing board and a decision will be taken in the next week,? he said.
