| Southward Ho!
New Delhi, June 1: Steel and aluminium prices appeared headed lower today after Steel Authority of India (SAIL) and National Aluminium Company (Nalco) said would charge less for their output.
SAIL cut prices by Rs 500-2,000 a tonne, triggering speculation that its principal rival, Tata Steel, is likely to follow suit when its quarterly contracts come up for review at the month-end.
Smaller steel makers Ispat and Essar said they would reduce prices by Rs 1,500-2,500 a tonne. Flat steel sold by these companies will now cost about Rs 26,500 a tonne on an average.
“Our price change is a correction keeping in mind the demand-supply situation. The price cut varies between Rs 500 and Rs 2000 per tonne across categories and locations,” a SAIL spokesperson said.
However, analysts said cheaper iron ore and a global move towards softer steel prices was forcing domestic steel manufacturers to cut rates.
SAIL officials said the prices of long products, the demand for which is much higher, were being reduced by Rs 500-700 a tonne, while flat grades will cost Rs 2,000 less.
Government officials, however, said prices came down partly because of ‘moral suasion’. In an inter-ministerial meeting about a fortnight back on steel prices, it had been pointed out that domestic prices remained high and sticky despite a global trend towards lower rates.
The high cost of steel has been embarrassing for the government as it has received frequent complaints from corporate users. Its own expenses have grown as it shells out more for steel being used in nation-wide highway and rail corridors.
Government officials said the finance ministry had been toying with the idea of reducing customs duty on steel imports, including scrap, to dampen price hikes. “This threat seems to have worked,” they added.
Steelmakers had last increased prices by about Rs 2,000 a tonne in March. A 4 per cent increase in excise duties also impacted steel prices considerably. The increase, coupled with a petro-product price hike, has led to inflationary pressures in the economy.
The country’s biggest aluminium maker, Nalco, also announced a cut in prices by Rs 2500 per tonne. Nalco officials said rates have been reduced keeping in view subdued trends on the London Metal Exchange.
Other aluminium producers Hindalco and Balco said they would cut prices in line with Nalco’s.
However, analysts said aluminium prices are likely to touch $1800 per tonne in about six months. They should stabilise in the $1700-1800-per-tonne band as China is likely to enter the global market with huge orders for aluminium in its pre-Olympic construction drive. Nalco said it would also revise its prices on a monthly basis, basing the changes on the London Metal Exchange.
After the price cut was announced, share prices of steel and aluminium stocks fell marginally on the bourses. SAIL shares closed at Rs 52.60 on the Bombay Stock Exchange, down from the previous close of Rs 54.65. Nalco shares also took a beating and closed at Rs 143.15 compared with yesterday’s Rs 146.15.