MSMEs demand steel regulator
With rising steel prices disrupting operations, micro, small and medium enterprises (MSMEs) in the downstream industries have demanded setting up of a regulatory authority for the commodity.
"Between September
2020 and June 2021, steel prices increased sharply and in the last six months there has been an increase of almost 100 per cent. Not only this, an increase of
50 to 67 per cent is being seen in the prices of HR sheet, copper, cold roll, which is very worrying for the MSME sectors," said Rajive Chawla, chairman, IamSMEofIndia.
"The most impacted by the increase in raw material prices are those units which supply under rate contracts to the Railways, defence, government undertakings, OEMs (original equipment manufacturers) and they do not get immediate compensation for the raw material price change," he said.
According to Motilal Oswal Financial Services, from the beginning of this month, steelmakers have raised the wholesale price of hot-rolled coils (HRC) by up to Rs 3,000 per tonne taking it to Rs
69,000/tonne. Cold-rolled coils (CRC) prices too have increased by around Rs
5,000 a tonne to Rs 86,000 per tonne. As a result, HRC prices are now higher by Rs 14,000 per tonne over March 2021 exit prices. Average HRC prices for April-June are higher by Rs 11,000 per tonne over January-March 2021 and have resulted in higher margins for flat steel producers.
"Rise in commodity and metal prices has rightly raised concerns in the user industry. In a globalised industry, the prices of finished products are directly linked to the globalised raw material prices and international stainless steel prices," said K.K. Pahuja, president, Indian Stainless Steel Development Association (Issda).
Though the second wave of the pandemic has posed demand-related concerns in the domestic market, the latest price increase follows buoyant international steel prices. The buoyancy is largely due to less availability of the material in the international market following China's decision to discourage exports by withdrawing 13 per cent duty rebates on exports. China has also taken a decision to gradually reduce production from the current level on environmental concerns.
The ever-rising steel prices have squeezed the margins of downstream industries. MSMEs want a regulatory body to be formed in order to keep price hikes under check. "A regulatory authority can check arbitrary price hikes," said Chawla of IamSMEofIndia.
Earlier this year, the Builders' Association of India, along with other real estate organisations, too had demanded a regulatory authority for the cement and steel sectors, alleging cartelisation and ‘undue profiteering’ by major manufacturers.
Even Union MSME and road transport minister Nitin Gadkari had also supported the idea of setting up a regulator for the steel sector.