Steel makers will honour their commitment to Prime Minister Manmohan Singh to hold prices for three months, but rates will go up thereafter, Vice-Chairman and Managing Director of JSW Steel Sajjan Jindal said, after taking over as Assocham President.
"Prices have to go up. We have to go into the global price regime...what can you do if raw material prices have gone up," Jindal told PTI.
Jindal took over as Assocham president on Tuesday replacing Venugopal Dhoot, head of the Videocon Group.
Large steel producers had reduced prices up to Rs 4,000 per tonne on request of Prime Minister Manmohan Singh on May 7. They had also agreed to hold the price line for the next three months. The three-month price moratorium expires in August.
Jindal said there is a big gap between global and Indian prices. "Today for hot-rolled coils, the international price is close to $1,200 per tonne. In India, we are selling it at $850 per tonne," he said.
The new Assocham president said the raw material prices, both of iron ore and scrap, are going up. Scrap is being imported at $800 per tonne, while the selling price is fixed at $850 per tonne.
"Either that part of the steel industry will close -- creating shortages -- or price have to go up," Jindal said.
Asked whether over $100 billion of investment announced by global majors like ArcelorMittal and Posco could face a risk if the government continues to restrict steel exports, Jindal said, "I guess so. One has to talk to Posco and ArcelorMittal and (ask) if there is an export duty and restrictions, whether they will invest."
Battling a 45-month high inflation of over eight per cent, government has withdrawn tax refunds on export. An export duty of 15 per cent was also slapped, though it has since been decided to withdraw it on most of the items.
Jindal said steel producers may have to look for other countries like Thailand, which has a free trade agreement with India, to set up new units if the government continues levying duties on exports.
"Thailand is inviting me to build a steel plant there. They are ready to give me land next to the ports. They are asking me to import iron ore from India, coal from China or Australia, make steel and export it back to India duty free," Jindal said.
On banning iron ore export, Jindal said it should be gradually discouraged by giving incentives to the miners for investing in value addition.
"I am not saying that we should stop export of iron ore, but we can encourage value addition within the country and discourage exports of iron ore or any mineral without value addition," he said.
Jindal suggested the miners should, in the first stage, set up pelletisation capacity for exports because there is a 100 per cent price difference between iron ore and pellets. While iron ore sells for $75-85 per tonne, pellets fetch $170 per tonne, he said.
Miners exporting iron ore can join hands with companies for value addition or set up their own units for the same, he added.
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