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Steel majors effect price hike - Views on News from Equitymaster
 
 
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  • Oct 1, 1999

    Steel majors effect price hike

    According to newspaper reports, steel majors Steel Authority of India Limited (SAIL), Tata Iron and Steel Company Limited (Tisco), Essar, Jindal Iron and Lloyds have hiked their domestic prices of steel by 2 5%. The price rise is effective from today.

    The rise in prices follows a surge in international steel prices. The rise in prices has been supported by the recovery in the economies of Southeast Asian nations and Japan. Moreover, with domestic demand looking up, the producers have been tempted into effecting a price hike.

    Source: CMIE

    The steel majors had been unable to effect a price hike, successfully, in the last one year. As a result of this, they had to absorb the increase in costs of production, especially those of petroleum products, resulting in thinner margins. Some steel majors have tried to get around this problem by selling their output in the international markets, where the realisations are much better as compared to domestic markets.

    With the domestic prices having been hiked, the steel companies are likely to benefit from improved margins on their domestic sales. However, there is a fear that the steel companies may resort to undercutting to boost volumes. The same could happen if there was a slack in demand growth. The price hike, nonetheless, reflects positively on the health of the economy.

     

     

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