Mumbai: Forced by the government to lower prices last week, JSW Steel Ltd needs to raise charges by about 20% as record-high raw material costs erode earnings, its finance director, Seshagiri Rao, said.

JSW, India’s third largest producer, will have to increase prices for hot-rolled steel, a benchmark product, by $150 (Rs6,000) a tonne from about $800 a tonne now, Rao said.

Steel makers including JSW will have to pay more for coal, a key ingredient, after South Korean steel major Pohang Steel Co., or Posco, on Monday agreed to a tripling in contract prices. Record coal and iron ore costs mean producers will need to pass on the increase to auto makers and construction companies, countering the government’s push to curb inflation that’s risen to a three-year high.

Rao expected contract coking coal prices to advance to about $250 a tonne instead of as much as $308.70 that Posco agreed to pay Australian suppliers. JSW imports 3.5 million tonnes of coking coal.

“This is unprecedented,” said Rao. “I was not expecting prices to go up to this level.”

Higher costs and demand for steel from Russia and West Asia may drive global prices to a record $1,100 a tonne this year, Rao said.