Steel manufacturers had focused on exports during the lockdowns to stay afloat
Consumers and raw material providers of steel are up in arms against producers over rising prices of finished products, prompting them to write to the central government.
Steel producers are justifying the price hike by pointing towards a shortage of iron ore, among other market factors. Mining companies that supply iron ore have sought a ban on export of steel products.
According to representations reviewed by Business Standard, both producers and raw material suppliers have written to the Prime Minister‘s office. Consumers of steel, such as electronic manufacturers, are also seeking a regulation in the prices and a 15 per cent export duty. They have written to the ministry of power in this regard.
In its letter, the Indian Steel Association (ISA) said the industry has “no recourse, but to raise prices of steel from time to time.” “Many steel companies in India with sub-optimal operating capacity showed substantial cash losses due to non-absorption of huge fixed costs for the quarter ended June 2020. Global steel prices fell sharply below $400 per tonne and domestic prices followed suit…when the global economy started opening up, international prices surged to over $750 per tonne from the bottom of $397 seen this year. As India is an open economy, steel prices move in accordance with the international price,” the ISA said.
Steel producers manufacturers had focused on exports during the lockdowns to stay afloat. With steel demand picking up, the prices have firmed up significantly.
The ISA also said there is presently an “acute shortage of iron ore”. “The Indian steel industry is facing testing times as the iron ore supply has been badly squeezed. At the same time, the prices of iron ore have shown an unprecedented rise in both national and international markets. The limited supply and rising prices of iron ore, which is the basic raw material for making steel, has also led to high steel prices,” the ISA said.
The Federation of Indian Mineral Industries (FIMI) said the ISA was ‘obfuscating the whole issue.’ Terming the steel price hike unjustifiable, FIMI said: “While working out the price of steel, the Indian steel industry takes international price as the base, whereas it gets high grade iron ore at comparatively much lower prices.”
“Duplicity of steel producers about shortage of iron ore is well exposed as some of the primary steel producers are themselves exporting iron ore,” FIMI said. It also blamed the larger steel producers for the reduced production of iron ore and referred to the auction of iron ore mines in Odisha, whose leases expired in March.
“The target production for April-October 2020-2021 was 28.70 million tonnes and actual production was 6.51 million tonnes. It can be seen that steel companies have failed to produce iron ore in accordance with the stipulation. Had the primary steel producers, who have got mines in the Odisha auction, been able to produce the quality mandated, there would not have been any ground for them to blame standalone miners for any alleged shortfall,” FIMI said.
These operational mines were reauctioned after their leases expired and the statutory clearances were automatically transferred to the new winners. This was done to mitigate any shortfall in production that would have occurred for want to regulatory approvals. According to FIMI, primary steel producers got the larger share of these iron ore mines and are now the reason for any dip in raw material availability.
The biggest brunt is being borne by steel consumers such as electronics manufacturers. In their representation, the Indian Electrical & Electronics Manufacturers’ Association sought a 15 per cent export duty on steel.
It said: “The electrical equipment manufacturing industry is passing through difficult times due to unusual rise in the price of steel, which is a basic raw material for the industry. The content of steel, as a raw material, varies from 25 to 60 per cent in various equipment.”