Auto component firms seek curbs on steelmakers citing unjustified price hikes

“Though steel prices around the world are going up, what we have seen in the last four months here is absolutely unwarranted. The hikes are not in accordance with increases in raw material prices,” said managing director and chief executive Asahi India Glass as also the president of Automotive Component Manufacturers Association (ACMA) Sanjay Labroo. “In any case what justification do some of the steel companies who have captive iron ore and coke capacities, have in increasing the prices.”

The auto component industry, one of the largest users of the commodity, has been facing a myriad set of problems from rising Chinese imports to declining exports due to rupee appreciation. The fresh round of steel price increases which in some cases like carbon steel is as much as 49 per cent since November 2007, have left them even more vulnerable.

While the industry is stopping short of using the R (regulator) word, there is unanimity that incentives for exports like in the DEPB scheme should be done away with for steel. “I am a strong believer in market dynamics so will not like a regulation of prices or imposition of an export duty. But with the same argument there is absolutely no ground for subsidising steel exports and instead it is the import and excise duties that should come down,” said Labroo.

The impact is already visible in the balance sheets of some of the auto component companies. “We keep analysing the financial performance of 50 auto component companies on a quarter to quarter basis and for there is going to be bloodshed in this quarter (ending March 31) especially for steel using companies,” said ACMA executive director Vishnu Mathur. “Even in the previous two quarters profitability was down and in December average PBT had declined by 60 basis points.”