NIFTY 50

As steel prices surge, Kalyani Steels may renegotiate deals with auto makers

Updated : June 25, 2021 12:55:20 IST

A lot has been happening in the metals sector globally. With Russia being a major producer and exporter of metals, recently decided to impose new export taxes on steel, copper, aluminium and nickel, starting from August 1, it could spell a lot of opportunities opening up for the rest of the world.

Closer home, in the domestic market, Nifty Metals has gone up by almost 2.02 percent in the past month. Narrowing it down to the steel sector, Tata Steel, SAIL and Kalyani Steels have been some of the top gainers in the last month, going up by 4.42 percent, 4.40 percent and 2.37 percent, respectively.

In a bid to combat the rising costs, Kalyani Steels could look at renegotiating the prices further with the auto original equipment manufacturers (OEMs) for July 2021 owing to the rising costs and the market being extremely volatile, said RK Goyal, managing director (MD), to CNBC-TV18.

“There is a huge increase in cost for us - whether it’s iron ore, coking coal, or ferroalloys. The cost increase during last quarter, starting from October to December was almost Rs 10,000 per metric tonne. Therefore, we requested our auto OEMs, and they have accepted Rs 5,950 per metric tonne,” Goyal said.

Clarifying more on the Rs 5,950 per metric tonne figure, Goyal said, “This negotiation was for the last quarter, April-June and almost everybody accepted this and we will be adjusting our prices now. This will continue for long, but we have an option to ask for an increase, effective from July 1, once again.”

A lot of the auto OEMs have now started to accept the price hikes that steel companies have undertaken. Of course, that would be more pressure on margins, but it would be good for steel companies.

For the entire management, watch the video.
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