MUMBAI: The forging industry, one of the steel consuming sectors, has written to the government of India seeking a ban on export of steel and iron ore amid sharp price hikes of more than 25-30% in the last three months.
“Steel prices have increased by 25 to 30% per cent in the last three months, putting the forging industry at serious risk, particularly when we are still recovering from COVID-inflicted business losses and the resultant pressure on cash flow, and cash reserves,” said Vikas Bajaj, President of the industry body, Association of Indian Forging Industry in a statement.
The forging association requests the government to consider a ban on steel and iron ore exports so that demand of steel within the country can be met in a cost / price effective manner, Bajaj said.
“Steel is the basic raw material for the forging Industry and typically constitutes 60 to 65% of the ex-factory value of forgings, with sharp increases this is expected to rise to around 75%, with such an increase in percentage of the input cost, survival of the industry has become challenging,” said AIFI in a statement on Thursday.
While the industry was reviving post the pandemic, the increase in steel prices has hammered the forging industry in India, the statement said.
“Forging Steel manufacturers have hiked the price by 10% over the last six months, and have now sought a further 15% increase, the initial increase itself was all but impossible to sustain, the further increase will prove to be disastrous,” the statement said.
As per AIFI, benchmark hot-rolled coil prices in the wholesale market (ex-Mumbai) is at Rs 52,000 per tonne from 36,500 per tonne in July, that’s a rise of 43%, an indicator that the prices of forging quality steel will be further revised upwards in the immediate future.
The price increases of steel in the domestic market are due to the increase in exports to neighboring countries and resultant reduction in supply within the domestic market. Apart from the increased export of steel, India’s iron ore exports have increased by 63%, the statement said.
This increase in exports is mainly motivated by the record steel production of the world’s largest steel manufacturer–China, the statement said. In FY20, India’s iron exports increased by 133% to 37.69 million tons over the period April-July 2020 compared to the corresponding period in FY19. And more than 80% of these exports have been to China.
“Domestically produced iron ore in India has met the needs of another country before catering to our own requirements,” the statement said.
The Forging Industry is one of the key players in the auto component manufacturing sector and it caters to the automotive sector, solar, aerospace, railways and wind sector.
“Export of steel is the major reason for the rate hike. Large mills are preferring to export steel to neighboring countries. Also, orders have been booked for Europe, the Middle East, etc., which is one reason for the shortage of steel in India,” said AIFI’s vice-president, Yash Jinendra Munot.
As per Munot, another factor that can be attributed to steel manufacturers to increase prices is minimal imports from other countries. “Japan and Korea, the main two exporting countries to India apart from China, are exporting more to Europe due to the restrictions placed upon imports into India by the Government of India,” he said.
“The government should consider banning the export of steel and Iron Ore for the next six to eight months or till such time that the local demand is met and should look at regulating steel prices for domestic consumption,” Munot added.