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CHAIRMAN's DESK

Chairman’s Desk The issue of rising prices has once again come to the fore since all the steel majors have raised prices in April, 2005 and this has expectedly led to protests from the associations of the consumer industry. The steel majors have responded by stating that for a long time, they have been keeping prices in check even though input costs have been going up. In fact, TISCO stated that due to an earlier promise made to the government to keep prices stable till March, 2005, they were unable to respond earlier to market forces but prices have now risen between Rs.1500/- to Rs.5000/- per tonne for various steel products. The steel minister, during various interactions with the press has also stated that rise in prices is inevitable in view of rising input prices. In any case, the government generally does not intervene to influence prices in a deregulated environment. Even the public sector which is under the control of government has to respond to the market forces because otherwise, profits will flow to the trading community and the final steel consumer will still not benefit. There is now a flurry of activity in the steel sector with daily reports of units signing MOU’s with the state governments for additional capacity creation primarily in the states of Orissa and Jharkhand. We earnestly hope that at least 50 per cent of this capacity of about 44 million tonnes will mature by 2011-12. In any case, we have projected a total capacity of about 65 million tonnes by 2012 and going by present indications, this figure should be exceeded by that time. There is also considerable consternation and concern at the prospect of an early downturn in the industry because the climate in China seems to be turning conservative and that the country has also become a small net exporter recently. The Chinese of course, are emphatic that their pace of domestic demand will continue to remain strong and there should be no cause of concern at the prospect of huge exports. On the other hand, World Steel Dynamics is increasingly making predictions of an early turnaround in the industry. These are all speculations and the primary concern of the industry should be to cut costs and become as competitive as possible so as to soften the turnaround when it comes. The present issue of the Bulletin focuses on GP/GC – colour coated sheets & tinplates. The demand for GP/GC sheets is on the rise and more of CR is being converted into GP/GC sheets primarily because of demand from the export market. Unfortunately, domestically, there is a perception that the cost of GP/GC sheets are prohibitive and there are concerns that domestic consumers are increasingly turning to aluminum and other materials because of the high prices. These should be legitimate concerns of the industry and we must control prices and ensure that the domestic market remains in-tact. The tin plate industry on the contrary is mainly anxious about large scale imports of seconds due to reduction of duty from 40 per cent to 20 per cent. The government has felt that differential of about 15 per cent between Primary and Secondary Products should be adequate protection for the prime producers but the tin plate industry is vociferous and advocating return to 40 per cent duty. Perhaps it is time for them to concentrate on cost cutting and becoming more competitive in the market as well as improving the quality of their products. At the same time, there is large market for off grade tin plate particularly in the packaging industry because the availability of tin plate in the country is not very high. (J P Singh) Joint Secretary Ministry of Steel & Chairman, JPC. (This is excerpted from JPC Bulletin March' 05)