Govt's steel price control move may hit speed-breaker

By Kenan Machado, CNBC-TV18

Despite an inflation-wary government's veiled threats, some steel companies have gone ahead and imposed a raw material surcharge, in effect increasing steel prices. This time around, the steel industry and the government may be on their way for a face-off.

It’s a heated situation at the moment, at least between the government and the steel industry. Sources tell CNBC-TV18, steel companies JSW and Ispat have imposed a raw material surcharge of about Rs 5,000 a tonne on their hot rolled coils. Though they haven't technically hiked prices, their customers will end up paying more. The surcharge decided on Wednesday will be applied retrospectively from April 1of this year.

While JSW offered no comments, Ispat has denied considering such a move. Steel majors Tata Steel and Sail also deny making any such moves.

“As far as Sail is concerned, we have not levied any raw material surcharge. We are yet to make the coal settlements with the Australian and other suppliers for FY08-09,” said SK Roongta, CMD, Sail.

But things may not stay that way for long. The world's largest miner and one of Sail's Australian coking coal suppliers-BHP Billiton said on Wednesday that it sees coking coal prices up between 206 and 240% for 2008. BHP Billiton concluded negotiations with the world's second largest steel maker Nippon Steel at USD 300 a tonne, up nearly 3 times from USD 98 a tonne yesterday.

So, surcharge or not, steel prices are headed up.

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