India: JSW stops alloy steel bookings for Apr deliveries; proposal to shift to quarterly auto contracts

JSW Steel has stopped all fresh booking of alloy long steel for April deliveries, SteelMint learnt from reliable sources.

"In view of the volatile market situation, it has been decided to stop all fresh bookings of Apr'22 delivery till further instruction," the steel major's alloy steel division is learn to have indicated yesterday.

The reason is, the company is trying to assess the cost increase against the current backdrop of extremely high raw material prices.

Proposal to shift to quarterly contracts

Importantly, JSW Steel is pushing for quarterly auto contracts, since automotive is the largest consumer of alloy steel. It seems the mills are now averse to taking a longer half-yearly position. "They are not keen to lock their prices with auto makers for the longer term and would prefer the quarterly contracts on account of the unprecedented cost push," said a source.

India's total alloy steel demand is pegged at around 7 million tonnes (mnt) in which the share of JSW Steel is around 1 mnt. About 70% of the 7 mnt is consumed by the automotive sector. JSW Steel is India's largest alloy steel producer.

Hike in auto contracts expected

In view of these trends, JSW Steel is looking to raise prices for the next auto contracts. The price increase will be effected from 1 Apr'22. The company has asked its customers to accept the raised priced and close the contracts by 25 Mar'22.

Factors that are being considered are price fluctuations in raw materials like coal, iron ore, ferro alloys, electrodes and refractory; adverse currency depreciation; increased freight cost; and increased working capital requirement due to all the above factors.

Prices of coking coal have touched $600/t FOB Australia while iron ore hit $162/t CFR China and nickel is at $28,000/t. Ferro alloy prices are at their peak while crude has touched $130/barrel and diesel prices are expected to increase in the next few days.

The last price increase was settled w.e.f. from Oct'21. During the course of discussions at that point, it had been decided that the next price revision would be applicable from 1Apr'22.

As per an alloy steel user industry source, most of Indian mills have stopped April deliveries of alloy steel although this could not be confirmed from the other mills. It was also learnt that the mills will not refrain from supplying alloy steel to those automotive manufacturers who are willing to shell out the increased prices.