Indian automakers may face a price hike of around 12-15% for half-yearly contracts with steel companies

Indian automakers coming out of lockdown lows are likely to face a price increase of around 12 % - 15% for half-yearly contracts with steel companies, SteelMint learned from its channels.

Most of the steel companies have proposed a price hike of around INR 6,000/t ($82) in flats and around INR 4,700/t ($64) in longs for H2 (Oct'20-Mar'21).

Price negotiations are usually conducted bi-annually, the prices for Oct 20 - Mar 21 period will be negotiated on the basis of flat steel prices over Apr 20 to Sep 20.

The contract due to be sealed on Sep 20 was deferred to Oct 20 as most of the auto companies wanted to observe how the demand will shape up once the economy begins to reopen.

Past contracts:

• H2 FY21 - Oct'20-Mar'21 - Proposed a hike of 12-15%
  
  
• H1 FY21 - Mar'20-Sep'20 - Prices rolled over
  
  
• H2 FY20 - Oct'19-Mar'20 - Prices decreased by 11-13%
  
  

Factors driving prices:

The festive-season cheer is evident - Indian car and bike makers reported their best monthly sales growth in about two years in September - passenger vehicle sales witnessed an increase of 26.45% and two - wheeler sales rose to 11.64% according to data available with industry body Society of Indian Automobile Manufacturers (SIAM).

Domestic HRC prices have increased by around INR 6,000/t ($82) in the last 3 months. Negotiations were to start from April 2020 but the nationwide lockdown derailed the negotiation and prices from H2 FY20 were rolled over. An official from a leading steel company said, considering the prices in H1FY21 were rolled over from H2FY20 we are looking at an increase of around INR 6000/t ($82) in flat steel and INR 4700/t ($64) in long steel.