New Delhi: With inflation at a high, the government has been under pressure to hold the price of steel steady. As a result, prices in the domestic spot market stand at around Rs36,000 per tonne at present. This is lower than international steel prices by Rs10, 000 to Rs15,000. However, secondary steel manufacturers say steel companies are selling the alloy to them at prices much higher than those intended by the steel ministry. This is on account of long-term contracts that the primary producers have entered with secondary manufacturers.
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In the past, the steel ministry has taken fiscal measures such as imposing duties on steel and iron ore exports and has communicated the need to hold the price line to steel producers. The decision has been conveyed informally and steel secretary, PK Rastogi, has told the press on several occasions that the manufacturers have assured the Ministry they will not raise prices.
Long-term steel contracts account for around 75-80% of steel trade in the country. Secondary producers have had to bear the full brunt of inflation because of them as primary manufacturers have only reduced prices for the retail spot market, but continue to revise prices frequently in the case of long-term contracts.
Srikant says typically all secondary manufacturers have long-term contracts. “But these are for long-term buying and the price is revised every quarter or half year,” he says.
With steel prices continuing to increase in line with international prices, it is the end-user who is at a disadvantage.