Hot Rolled Ferrous Metals’ Price Setting Mechanisms

Hot roll steel prices have no official controls or policies and they are to be determined by the market. However, there appears to be market flaws and likely cartelization which has given the manufacturers of HR Coils with larger degree of market authority over the consumers.

The users of HR coils, primarily the mills manufacturing cold roll or galvanized sheets or pipes have highlighted to oligopoly pricing performance of the hot roll producing firms. Their main disagreement, as declared by them, is the following:

The HR coils manufacturers have intentionally minimize supplies to the local market by selling out abroad considerably high amounts of the product, regardless of the reality that the whole quantity could be consumed in the local market at the cost they are exporting or even at elevated prices.

It is quarreled that there was a point when the local HR Coils industry was experienced with surplus capacity coming from a rupture of capacity addition and simultaneous slowdown in local steel requirement. This was the period when the exports were essential.

Conversely, the marketplace for buyer of HR coils has transformed considerably in view of the fact that supply has constrained. Scarcity is evident with prospective purchasers following sellers. However, after hard buyer chasing to seller the HR coils are being sold abroad in huge quantities at lesser than the potential/actual domestic market prices to generate synthetic shortages so as to reinforce their own pricing power and continue in that way an “uncompetitive and inflated” price altitude in the local market. This accusation has actually been lifted frequently by users of other steel products as well.

According to the user firms, the HR coils manufacturers place prices in unison in infringement of the standard of a competitive market. The price augmentation had no orientation to any explicit modification in the market, neither in the demand nor supply side of it. They have also established the worth augments as random having no association with their expenses or any modification in them. Numerous have yet blame the hot roll steel producers of contract infringement as prices were amended unilaterally devoid of any prior notification.

On the other hand, in the absence of competitive alternatives, the consumer industries are left with no additional options but to submit to the requisites, conditions and prices dictated by the Hot Rolled Coils manufacturers.

A.S.Firoz. Indian Steel : Critical Details, Evolving Structure and Strategic Options,. 2009.