The notification imposes a floor price for imports of prime and second grade steel products. This price hike is likely to be made effective from today (December 21). However, despite the price hike, the new list prices will be lower by around 6-25 % of the newly set floor price for imported goods. What is more, unlike the two recent price hikes, which had to be scaled down immediately after the price hikes, the steel producers are upbeat of being able to sustain the price hike for a relatively longer period.

As a result of the commerce ministry's latest step to protect the domestic steel industry, the looming threat of imports of second grade steel material would not materialise now. This, coupled with the first quarter of the new year expected to be the busy season for the steel industry, has emboldened the steelcompanies to increase their prices. The overall markup of various grades of steel effective from today (December 21) is likely to b e in the range of 15-25 %, with the exception of alloy steel where producers are not sure of the actual impact of the government's latest notification. Tisco, the steel major, for example, plans to raise the price of its entire range of steel products effective from today (December 21). The company officials refused to give exact details of the rise in price, but stated that they are planning price rise in the range of 15-20 % per tonne for various grades of steel.

As of today, the D-grade HR coil (2mm thick and 905mm width) is sold by the company at Rs 12,000 to Rs 12,500 per tonne depending on the quantity purchased by the buyer.

At the Mumbai steel market, the same product is sold by Tisco at Rs 14,500 per tonne. Hence, one can expect the new price of this material (in Mumbai) to be in the range of Rs 16,675 to Rs 17,400 per tonne.SAIL, the country's biggest steel company,is also contemplating a similar range of price increase.

But, as SK Agarwal, chief technical manager, (ministry of steel) says: The producers should not push for too much of price rise of steel products as the higher price tends to restrict demand".

The floor price of tinplate and cold-rolled non-oriented (CRNO) sheets set by the government $720 and $763 per tonne works out to a landed cost of Rs 44,000 per tonne and Rs 48,000 per tonne respectively. Simulteonously, the current market price for tinplate and CRNO is at Rs 32,000 and Rs 38,000 per tonne--35-40 % cheaper. Despite this lucrative gap, the steel producers here are intending to raise prices only by around 15-20 % as said earlier.

According to SK Agarwal: If the prices are raised to match the landed cost, there are chances there would be fall in demand and the market may not be able to absorb the full price rise."SBI Securities's assistant vice president, Pratik Agarwal, echoes similar views of Agarwal , while also adding that the prospectiveprice rise would remain till end-March 1998. "The government had acceded to all the petitions of the steel industry and if today the companies start undercutting each other, then in future the will not bail them out by giving any fresh concessions," Pratik Agarwal feels.

With restriction on imports of steel products, and therefore, the relative elimination of steel traders engaged in imported products, the steel traders dealing in domestic companies' products are optimistic of garnering higher business. SB Maroo, president, steel chambers said that with the imposition of floor price on seconds, the cost of seconds have become more than that of prime grade material manufactured by Indian players.

Citing an example, he stated, that considering the floor price of second grade HR coils at $232 per tonne, the landed price after adding the importers' margins works to Rs 18,000 per tonne. This is more than that of current price of prime grade material of similar dimensions manufactured by the Indian player.Earlier importers brandished the threat of imports of seconds so as to force the domestic suppliers to offer products at lower prices. The latest notification effectively stops such a malpractice to be contained by importers.

Amidst all the price rise of steel products, alloy steel seems to be the only exception where producers are not rushing in to raise prices, at least for two reasons. One, the government has not yet defined the meaning of the word of `alloy' steel.

Two, alloy steel, mainly used in the automobile sector, consists of small scale players. As the demand from automobiles is not expected to rise in the near future, there is chances that players in this sector may undercut each other, making price rise in alloy steel difficult.