SAIL may cut steel prices soon

The steel ministry had expressed concerns on increase in steel prices by domestic firms, including SAIL and Tata Steel, which own captive reserves of iron ore and coking coal

State-run Steel Authority of India Ltd (SAIL) on Thursday said that it may cut prices of some of its products in the near future, reports PTI. The company last week had raised prices of flat and long products by Rs1,500.

"Since long steel product prices have gone up to a certain level, there may be some correction in the category in near future," SAIL chairman SK Roongta said when asked if the company will revise prices of its products soon.

Long steel products are mainly consumed by construction and infrastructure sectors.

It is learnt that the steel ministry had also expressed concerns on increase in steel prices by domestic firms, including SAIL and Tata Steel, which own captive reserves of iron ore and coking coal.

Many steel companies had cited increase in input cost besides the demand surge, for the price increase. Iron ore prices, which had fallen below $50 a tonne last year, are hovering at $100 a tonne at present.

However, Mr Roongta said, "Input cost does not determine steel prices. It’s market fundamentals which decide prices."

On prices of flat steel products, which are primarily consumed by automobile and consumer durables industries, he said, "Prices are governed by international trends and international prices are rising."

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    Sugar prices surge to all-time high at Rs4,250/quintal

    Demand for the ongoing marriage season and approaching festival of 'Makar Sakranti' might further boost buying activity in the face of tight supply

    Sugar prices on Tuesday rose to Rs4,250 per quintal at the wholesale market on increased buying for the current festival and marriage season amid widening demand-supply gap, reports PTI.

    The sweetener, which is already trading double at Rs41 per kg in the retail market over the last one year, is likely to scale more heights as demand for the commodity rose sharply during the last fortnight among bakers and hoteliers for major events like Christmas and New Year, market analysts said.

    They said that the demand for the ongoing marriage season and approaching festival of 'Makar Sakranti' might further boost the buying activity in the face of tight supply.

    As per the consumer affairs ministry, sugar prices have gone up to Rs 41 per kg in the local market due to a demand-supply gap.

    Traders at the Delhi wholesale market said the sweetener might become more costlier as it has risen to Rs4,150-Rs4,250 per quintal in bulk trading against Rs3,590-Rs3,700 per quintal on 19th December.

    They said there is restricted supply from mills on account of a fall in production, while bulk users like soft drink manufacturers and retailers have placed more orders.

    Sugar medium and small grade prices jumped further by Rs100 each to Rs4,150-Rs4,250 and Rs4,140-Rs4,240 a quintal respectively. It had gained Rs200 in the previous session.

    Similarly, the sugar mill-gate prices, at which the companies sell from factories without duty, also rose in the range of Rs100 to Rs70 per quintal.

    The sugar from Kinoni and Mawana mills rose by Rs80 and Rs70 to Rs4,000 and Rs3,970 per quintal respectively. Dorala mills rate rose by Rs100 to Rs3,980 per quintal.

    A senior official with a leading sugar firm said that the rise in domestic price is in sync with global prices, which touched $718 (Rs33,229) a tonne in London.

    The continued restriction imposed by the Uttar Pradesh government on the movement of imported raw sugar also has a bearing on the recent spurt in sugar prices, he added.

    Domestic sugar companies, which had contracted to import over five million tonnes of raw sugar till 15th December have gone slow on further contracts, even though the country needs another two million tonne to meet the demand-supply gap.

    Sugar production from domestically-grown sugarcane is pegged at 16 million tonnes, while annual demand is 23 million tonnes. The gap is being met through imports.

    Mill delivery medium and second grade followed suit and edged up by the same margin at Rs4,050-Rs4,150 and Rs4,040-Rs4,140 per quintal.

    Following are today's rates in Rs per quintal: Sugar ready M-30 Rs4,150-Rs4,250 and S-30 Rs4,140-Rs4,240; Mill delivery M-30 Rs4,050-Rs4,150 and S-30 Rs4,040-Rs4,140.

    Sugar mill gate prices (excluding duty): Kinonni Rs4,000, Asmoli Rs3,910, Mawana Rs3,970, Titabi Rs3,900,Thanabhavan Rs3,890, Budhana Rs3,890, Dorala Rs3,980.

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    Power tariffs in open market crash to Rs2-Rs5 per unit

    Power tariffs in the open market have crashed to Rs2-Rs5 per unit in December from Rs12-Rs14 per unit in June 2009. Seasonal fluctuation leading to low demand is being stated as the reason for these low tariffs

    Riding on high merchant power tariffs, a number of power companies have planned huge capacity expansions to cater to merchant power trading. The recent drop in merchant power tariffs, however, has shown that prospects are highly seasonal in this sector.

    Power tariffs have fallen to Rs2 to Rs5 in December from a high of Rs12 to Rs14 per unit in June 2009. Merchant power tariffs have been on a downturn since September. They were quoted in the range of Rs6 to Rs8 by the end of September and the beginning of October 2009. In November they fell to Rs2 to Rs4 per unit, with power traded during non-peak hours falling to below Rs2 in mid-December 2009. During the last week of December, day-ahead market prices for merchant power on the Indian Energy Exchange ranged between below Rs2 per unit to Rs5 per unit.

    Analysts believe that this drop is a seasonal phenomenon as power demand goes down in the winter. The situation will change from March onwards, with the onset of summer, they said.

    Earlier, Moneylife had reported on how the volume of power trading over the past three years has jumped at a 22% compounded annual growth rate (CAGR) to 21 billion kilowatt hour (kWh) in 2008. These units were also traded at comparatively high tariffs—557 million units were traded between Rs8-Rs10 per unit (as against nil in 2007) and 5,292 million units were traded for Rs6-Rs8 per unit (as against 461 million units in 2007).

    These high prices enjoyed in merchant power trading are due to the liberty that merchant power-generating companies have to trade power at any price during periods of peak shortage. The cost of electricity generation ranges between Rs1.75 per unit for coal-based power projects to Rs3.50 per unit for thermal power plants. Selling at Rs5 and above ensures super profits. At times of peak demand, power trading can fetch as much as Rs14 per unit, as reported in June 2009.

    However, merchant power trading also has a downturn. Such high tariffs could be enjoyed only during the peak demand season; the prices could fall well below Rs5 per unit during off-peak demand seasons like winter—as in November 2009 and December 2009. As companies will not be able to cover their fixed costs and thus incur losses, companies trade power even at lower tariffs.

    Lured by high merchant power tariffs, a number of companies have set aside some share of their total power production for merchant power sale. According to a report by broking firm Enam Securities Pvt Ltd, new power projects of 62 gigawatts (GW) will come up between 2011 and 2014. Of this, 13.3GW will come from merchant power projects.

    Recently, Shree Cement Ltd announced plans to set up a 300 megawatt (MW) merchant power capacity at Beawar in Rajasthan. The power generated from this plant will be sold in the open market and not used for captive purposes.

    Cement major Shree Cements has planned merchant power plants; drug manufacturer Torrent Ltd also plans similar expansions. Torrent is planning power projects of 3,647MW, 40% of which will be sold as merchant power. Adani’s 6,600MW power project includes 1,848MW for merchant power.

    Huge power capacity is also expected from Jindal Steel & Power Ltd, which plans to ramp up capacity for merchant power from the current 4,000MW to 11GW by FY12 and 30GW by FY17.

    Sterlite Industries Ltd also plans to set up a 2,400MW power project through Sterlite Energy, which is its 100% subsidiary, to gain space in the merchant power segment. Sterlite is planning power projects for a total of 4,400MW, out of which 40% would be merchant power projects.

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