Steel companies raise prices by 10-16% for auto industry

After protracted negotiations, leading steelmakers have finally struck a deal with automakers for a price increase of 10-16 per cent.

For flat steel — used in car bodies, non-exposed car chassis and safety components — the increase is ~7,500-~9,800 a tonne; the increase in longs — used in engine, transmission, steering, seating and wire applications — is about ~6,000 a tonne. Some of the mills have already finalised contracts; some are hoping to close by month-end. The contract is for the April-june quarter.

Ranjan Dhar, chief marketing officer, Arcelormittal Nippon Steel India (AM/NS India), said, “We have finalised some contracts and the rest will be done by the end of the month. The increase in CRCA (coldrolled close-annealed) will be around ~10,000 a tonne for the Q1 of FY.” AM/NS is into flat steel making.

Jayant Acharya, director (commercial & marketing), JSW Steel, confirmed that auto contracts for the April-june quarter had been finalised.

Tata Steel is working towards closing its contracts by month-end. Acharya said, “While we appreciate the closure, there is still a substantial gap between domestic spot prices and quarterly contracts finalised in different products.”

Steel industry sources pointed out that the gap between domestic prices and quarterly auto contracts is about 18-25 per cent in different products per tonne after the increase. Also, the gap between international spot and domestic quarterly contract prices for automotive is higher. One of the producers said the opening price for CRCA was ~57,000~58,000 a tonne (starting point for negotiations), and for autograde hot rolled, it is ~54,000~55,000 a tonne. With the finalisation of April-june contracts, companies are likely to open negotiations for Q2 and indications are that the increase could be higher. Dhar said, “We will soon finalise the Q2 contracts as well, on the basis of movement of the index during April-june, which should be around ~20,000/tonne.”

Steel prices have been surging over the past year, globally. Domestic flat steel prices nearly doubled to ~72,000 a tonne in June 2021 from ~38,000 a tonne in June 2020. Long steel prices rose 1.4 times to ~57,900 a tonne, a CRISIL report, earlier in the month, had said.

Domestic steel prices, however, were still at a discount to international prices. Much of the surge in domestic steel prices happened after November, which saw the auto contracts move to a quarterly pricing from a six-monthly one.