Commodity Online

NEW DELHI: Steel prices now a days are playing a crucial role in the financial system as its prices can influence inflation. Spiraling steel prices not only hurt the forgings units but also castings and foundry units.

In the wake of rising steel prices, these industries are worried, as they failed to pass this duty cut effects to customers. In 2007, India produced 7 million tonnes of castings and now the country stands as the fourth largest producer of steel in the world, aiming to attain the second slot by 2010.

However, the current spiraling price and shortage of the metal may become a hurdle to the target.

Meanwhile the government has even taken several measures to tame the rising inflation in the food sector and asked the steel industry to curb the price hike. The government has directed the steel industry to reduce steel prices by 10 percent to 20 percent.

Measures like the introduction of an export duty on steel exports, imports duty cuts, introduction of ad valorem duty structure for ore exports and reduction in excise duty on steel from 14 percent to 8 percent are on table.

Analyst said that these measure likely to increase the imports and discourage the exports. Steel prices have spiked by almost 25 percent to 30 percent between January to March 2008 and there are enough signals to suggest a further hardening of prices in the coming days.

While steel producers say that the they had been instructed to restrain on the exports of steel products and its the duty of the government to keep a check on supply side issues. The raw materials cost hike forced them to increase the steel products, they said.

The government officials, however, say that iron ore prices are only one of the factors leading to the escalation. A mere reduction in prices by iron ore producers would not solve the problem as iron ore is just one of the ingredients in steel production.