Steel-makers raise prices the third time since January .

New Delhi, April 2 It will be a lighter pocket for the common man as another price hike in the steel sector is poised to result in consumer products becoming more expensive. From cars to consumer durables, companies have announced or are in the process of announcing a hike in prices.

The price of HR (Hot Rolled) Coil, which is the main input for many of these products, is now close to Rs 45,500 a tonne, a third increase since January this year.

Steel Authority of India Ltd (SAIL) and Essar Steel have increased prices by Rs 2,000-2,500 a tonne and this has had a direct impact on the country's largest car-maker, Maruti. The company is implementing a price hike between Rs 1,000 and Rs 10,000 across its models. “The A-star and Ritz will now cost Rs 1,000 more, while the Estilo will become costlier by Rs 2,500, the Omni by Rs 3,000, the Swift by Rs 3,750, the DZire by Rs 7,000 and the SX4 by Rs 9,000,” said the company, attributing its revision to increasing input costs and Bharat Stage IV norms.

Mr Dilip Chenoy, Director-General, Society of Indian Automobile Manufacturers, told Business Line that pricing will be each manufacturers' own decision; while some may be able to absorb the higher prices, others may choose to pass it on.

“High commodity prices and cost of finance are obviously reasons to worry. The industry will soon have to take a decision,” he said.

Consumer Durables

The consumer durables industry is also feeling the heat, with Samsung already contemplating an increase in its air-conditioner prices. “We expect to make an announcement next week,” said a company spokesperson.

The Consumer Electronics and Appliances Manufacturers Association (CEAMA) Secretary-General, Mr Amitabh, admitted that this could be the trend in other companies as well. “It is a substantial increase and there is chance that prices could go up,” he said.

LG India has already hiked the prices of its products by 1 to 5 per cent on March 15.

Real Estate

Those in the process of buying property may soon feel the pinch. According to a civil engineer, “On an average 7 kg of steel is used for every sq ft of a 15-storey building. So the latest steel price hike would mean an increase of around Rs 14 per sq ft.”

When contacted, a Unitech official said, “Steel comprises 10 to 15 per cent of our construction costs. An increase of 4-5 per cent on this particular component would translate into 0.4 or 0.5 per cent impact on overall construction cost. So there will be an impact, but to that extent.”

Procurement Practices

Rise in steel prices may alter the procurement practices of major steel consumers. “Considering that the steel prices are increasing sharply, we have taken steps to optimise procurement procedures. We will also work on the design aspect to optimise the materials we use,” said Mr B. Prasada Rao, Chairman and Managing Director, Bharat Heavy Electricals Ltd.

Maruti Suzuki Ltd too would be forced to take a hard look at steel procurement. “Pricing is a strategic decision. We hope to absorb the rise in steel costs by cost-reduction techniques in our production. Our contract renewal with our steel suppliers is due this month – we usually have long-terms contracts because we buy at fixed prices,” said Mr Subir Moitra, head of the company's supply chain.

Costlier Raw Materials

The latest upward revision has been attributed to increasing costs of materials such as coking coal and iron ore. According to industry observers, mining firms are entering into supply contracts with steel makers for the April-June quarter at about $110-120 a tonne, which is an increase of 80-100 per cent from the levels of 2009-10 annual contracts.

However, the Steel Minister, Mr Virbhadra Singh, allayed fears of an inflationary concern. “There has been a spurt in steel prices in the domestic market recently but it is a temporary phenomenon and at present there is no inflationary concern,” he said on the sidelines of the SAIL event.

Source : Business Line