FOPSIA writes to Union Minister of Steel; Demands enquiry for huge fluctuation of steel prices by ICEX commodity exchange

Author(s): 

Badish Jindal, President, FOPSIA.

Ludhiana, July 10, 2019: Federation of Punjab Small Industries Associations (FOPSIA) president Badish Jindal has shot off a letter to Dharmendra Pradhan, Union Minister of Steel, with regard to fluctuation of steel prices affecting the steel manufacturing and consuming industries and requesting him to impose ban on future trading of steel for controlling fluctuation. He has also urged upon the minister to order an enquiry for huge fluctuation of steel prices by ICEX commodity exchange.
The letter reads as under: “Since last two years the steel manufacturing & consuming industry is in big trouble due to the high fluctuation of steel prices in India.

The average steel fluctuation in China is less than 0.1% whereas In India the average daily fluctuation is 1% to 2% which is on very higher side.

Earlier an SMS cartel was managing the prices of steels by issuing daily prices on SMS and secondary steel companies were forced to maintain their prices as per SMS this created a huge gap in the prices of primary and secondary material.

To control the situation the secondary steel companies raised the voice against the SMS cartel and that was stopped with the help of police and judiciary.

Now the ICEX & many other future commodity exchanges are issuing daily steel prices on the apps. They issue the prices for main three secondary steel producing cities, Gobindgarh, Ghaziabad and Raipur.

In last one month they fluctuated the price to around 15%. They keep the price as per their profit making tendency as they book the advance steel on higher prices and bring down the prices near to supply dates. Their daily fluctuation in steel is from 1% to 3%. Which means around Rs 400 to Rs 1200 per mt per day.

The secondary steel companies in India are forced to keep their prices as per the daily index prices of these commodity exchanges so they reduced the prices to around 4000 Rs per mt. during last one month.

Whereas the primary steel companies announces their prices as per the decision of Indian Steel Alliance ( Association of big primary steel plants)

Even today the difference between primary steel and secondary steel is more than 7000 Rs which is around 20% of the steel cost.

Due to this difference the auto parts, bicycle parts and other steel consuming industries which consumes Primary steel are forced to procure from primary steel producers on very high prices whereas the scrap is to be sold to secondary steel producers on very lower prices. Due to this their production cost increased from 3% to 8%.

Due to price uncertainty the domestic and international buyers canceled their orders. It is hard for the steel consuming industries to make their price lists due to this price trend in steel.

This is badly affecting the steel manufacturing and steel consuming industries.

The steel sector is already in red category and their huge losses will increase the trouble for banks, revenue and steel consumers.

Such a fluctuation is unbearable for both steel producing and consuming industries. Moreover there are no reasons for such huge fluctuations of steel in India.

This resulted into the closedown of many steel mills during last few month and others are forced to face the huge losses.

Few months back many steel mills were in process of expansion and many new steel units were coming up in Punjab. In Punjab only there were proposals of more than 100 new and expansion of steel mills with an outlay of 5000 crores. But this fluctuation forced all these companies to stop their expansion.

So it is requested that being the essential commodity the future trading of steel should be banned immediately beside this an enquiry should be ordered to find out the reasons for such huge fluctuations.”

Date: 
Wednesday, July 10, 2019