Tata Steel MD Suggest Index for Steel Prices in India
Business Line reported that in a bid to assuage concerns around steel pricing and allegations of industry cartelisation, Tata Steel has suggested index-based pricing to promote transparency and ease the pressure on both the user as well as steel companies. Tata Steel CEO & Managing Director Mr TV Narendran told Business Line “We can find a way to index steel prices and follow it both ways when prices go up and down. I say this from my experience in NatSteel in Singapore.”
Citing an example of how the index in Singapore has helped stakeholders, Mr Narendran said that steel in a road project is just 5% of the cost. He said “If steel price goes up by 30%, then the cost goes up to 8%. Eventually, the person building the road in Singapore follows the index to ensure the contractor does not suffer and the government benefits if steel prices drop.”
Mr Narendran said “When steel prices dropped two years back, I do not think any benefit went to the government. So if we have an index it will benefit both ways. We have to think of some mechanism. As a steel company, if asked for a fixed price forever I am happy to offer it. Instead of dealing with different price points at USD 350 and USD 1,000, if you give me a USD 650 guaranteed price it will help us in making investments. As steelmakers, we want a steady price but it does not work that way.”
He added “It is unfair to accuse steel companies as prices in India are just reflecting what is happening in the international markets. We did not have too many sympathisers when steel prices dropped. It is unfair to accuse the industry of doing something different. If the steel price in India was going up and in the rest of the world it is dropping then you can say something is fishy. I dare say, still steel prices in India are cheaper compared to anywhere in the world even during the peak. I do not think no company or group of companies can control steel prices. Ultimately, what happens in steel prices is dependent on what happens in China. Every other thing is irrelevant.”
The user industry has been complaining that high steel prices have been draining their competitiveness and their existence is threatened with margins being wiped out.