November 20, 2008

Indian steel firms sell direct to users to curb price – Report

Reuters reported that Indian steel firms have started selling products directly to small buyers to help save costs, as part of their commitment to keep prices down and stave off inflationary pressures.

While steelmakers themselves would be unaffected by the move, small and medium enterprises who have been forced to buy through middlemen because of the smaller size of orders may save between 20% and 25% of their costs. About 5% of hot rolled products are marketed through retailers who buy from the steel companies at the same price as major buyers and sell it to SME consumers at a marked up price.

A senior official at JSW Steel Limited said that "The ultimate beneficiary of the current system is the middleman. As a support to the government to fight inflation, we are selling directly to the end consumers to ensure they get the right price."

Steel firms promised to take steps to fight inflation last week including reviewing trading arrangements and setting a maximum retail price. Other steps include advertising the price and facility for small buyers to buy through the internet.

JSW Steel Limited said in an advertisement that it will make up to 10 tonnes steel available to actual users through its warehouses across India. TATA Steel Limited sells only 20% to 25% to retailers and has no plans for direct retail sales. Jindal Steel & Power said that it does not have any such plans as of now.