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Thermal coal price hike to impact secondary steel makers – ICRA

Steel News - Published on Tue, 16 Jan 2018

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PTI reported that the hike in prices of thermal coal by state-run CIL is likely to make producing steel for secondary steel players costly by up to INR 500. ICRA said “The increase followed an additional levy on evacuation facility charges (EFC), of INR 50 per tonne, from December 20. The recent hike in coal price and railway freight rate hikes, following the earlier levy of EFC, is expected to increase the cost of steel production by INR 150-500/MT for a secondary steel producer using sponge iron and induction/electric arc furnaces for steel-making, and dependent on domestic coal.”

Senior VP and Group Head – Corporate Ratings at Icra, Jayanta Roy said “The cumulative effect of this recent increase in raw material and freight costs would negatively impact the operating margins for secondary steel producers by 45-145 basis points at current price levels, unless such mills are able to pass-on this cost increase to consumers.”

It also said that for the higher calorific value G7–G9 grades, which are typically used in the sponge iron kiln, the price increase including duties and taxes ranges from INR 58 per tonne for the G9 grade, to INR 468 for the G7 grade. For the lower calorific value G10–G12 grades, which are typically used in captive power generation, the price increase ranges from INR 58/MT for the G10 grade, to INR 210/MT for the G11 grade.

Icra further said “The steel players are also expected to experience an increase in inward freight costs on account of the rate revision by the Indian Railways for movement of coal and coke, the effective rate of increase has been around 4 per cent over the prevailing rates across various distance slabs. Unless secondary players are able to pass-on this cost increase through steel price hikes, operating margins for such mills are expected to decline between 45-145 basis points at current price levels.”

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Posted By : Nanda Koijam on Tue, 16 Jan 2018
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