CHENNAI: A China-induced spike in iron ore prices is affecting the infrastructure projects as builders, contractors, and Indian Steel Association (ISA) has urged the Union Ministry of Commerce to impose a temporary clamp on iron ore exports for six months. Prices of hot-rolled coil have increased by 46 per cent to Rs 52,000 per tonne in November as compared to Rs 37,400 per tonne in July this year.
Rebar TMT, which is used in housing and construction sectors had touched Rs 50,000 a tonne, industry sources said. It is learnt that steel prices could touch Rs 60,000 per tonne by the beginning of 2021. Amid the pandemic, 92 per cent of steel exports were directed towards China despite the India-China standoff along the LAC, said Bhaskar Chatterjee, ISA secretary-general and executive.
It is learnt that as much as 27 million tonnes of iron ore were shipped to China between April to August 2020, highest since 2011-2012. “When Indian steel companies, particularly the secondary players are facing acute shortage of iron ore, the domestic iron ore, which is being exported, causes further strain on logistic movement of domestic supplies,” said Chatterjee.
Sunjoy Garg, chairman and MD of South India Steel Industries and a member of ISA told Express that government’s allocation of Rs 100 lakh crore for infrastructure development in the budget was a positive move; but with steel prices going up, it will have an impact on the entire infrastructure and the export of iron ore should be banned completely.
“If it is not banned, the impact will be cyclical. The prices of auto components, automobiles, housing, and everything which requires steel for its build would go up, impacting the finances and plans of the common man,” said Garg, while urging the government to act on the issue immediately.
Even the Association of Indian Forging Industry is upset with the development. Steel prices have hammered down the forging industry in India. Forging steel manufacturers have hiked the price by 10 per cent over the last six months, and have sought a further 15 per cent increase. The initial increase itself was all but impossible to sustain; any further increase will only prove to be disastrous. Steel is the basic raw material for the forging industry and typically constitutes about 60 to 65 per cent of the ex-factory value of forgings. With the abovesaid two increases, this is expected to rise to around 75 per cent, with such an increase in percentage of the input cost, survival of the industry has become challenging.
Industry people speak
An official with an auto manufacturing unit, on condition of anonymity, said the prices of cars could go up with the rise in auto component prices. When Express contacted Larsen & Toubro, the company refused to comment on how much the steel prices will affect their projects across the country. A National Highway Authority of India (NHAI) official said there has been a shortage in supply of steel at the sites. “There is a provision of escalation after price rise in the construction.
This should be able to compensate for the price rise,” he added. However, contractors who have taken projects worth less than Rs 100 crore will be impacted with the sudden price rise, said Muthuswami Mohan, national president of Builders Association of India and head of Metro Road Construction. R Sivakumar of SM enterprises, a contractor who has take up an Other District Roads (ODR) project in Tiruvallur, said there has been a cost overrun by 20 per cent in the project which he undertook as he has to lay a steel culvert.
The price escalation of bitumen and diesel is included in the cost escalation agreement but steel and cement prices are not equated as per the market price. Meanwhile, ISA has informed the Prime Minister’s Office about the price increase of the metal after Union Road Transport and Highways Minister Nitin Gadkari wrote a letter to the PM on the impact of rising steel prices on infrastructure projects.