NEW DELHI (Commodity Online): India’s Steel producers are likely to raise prices by 30%.

Steel Authority of India Ltd (SAIL), the India’s largest producer of the metal, said the company expects a further rise in raw material costs in the coming months. New coking Coal contracts are being signed at $200 per tonne as compared with $105 per tonne last year. The cost of Iron Ore is also going up. In such a scenario, SAIL will have to increase prices of steel products by 25-30%.

Tata Steel told news agencies that iron prices will rise 35% this year in India.

Tata Steel said rising raw material costs are of huge concern for bottomlines for steel firms.

SAIL had recently said that steel prices could breach the $700-mark if raw material prices remain high. Steel prices are currently at $600-650 per tonne.

However, the price increase will be gradual. Steelmakers won’t be allowed to increased prices by 30% in one go. They will do it gradually.

The key question is the extent to which Steel producers can pass on the higher-than-expected coking Coal price rise to consumers.

In the short-term, stocks in the steel industry may be under pressure, as markets will be concerned about the direct impact of the coking coal price rise on profitability, as well the possibility of even higher Iron Ore price rises.

These concerns are likely to continue until steelmakers demonstrate their pricing power by hiking steel prices.

Spot iron ore prices are at around $115 per tonne now and the industry expects long-term prices for the next fiscal to be set at around $100 per tonne, up 25-30% from the current year.

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