Indian steelmakers to renegotiate contracts on costlier feedstock

More Indian steelmakers could retrospectively increase prices in existing contracts after one major steelmaker did just that this week due to raw material supply shortages that have significantly increased costs, Indian market sources tell Kallanish.

Owing to surging coking coal and ferroalloys prices, Indian mills are planning to invoke force majeure clauses and renegotiate short and long-term contracts with customers. The recent hike in coking coal prices has made it difficult for mills to supply finished steel at January/February contract prices.

“Due to the global geopolitical situation, there is a problem of short supply of raw materials and that too is at a very high price,” Bhushan Power and Steel informed its customers in a note. “This is a force majeure situation … The net impact of this coal and iron ore price increase is coming to INR 25,250/tonne ($331). We request you to accept [the price hike] and continue the same [contract].”

The steel company has requested its customers to finalise their decisions by 25 March, after which the firm will procure raw materials and start contracted production accordingly.

It could not be contacted for comment before deadline on Tuesday.

The coking coal crisis has also impacted production at other major steel producers. One local trader says: “Other steel companies might invoke force majeure in the coming days on soaring coking coal prices.”

The force majeure is expected to impact all bookings done by Indian steelmakers in January and February for April shipment. Bookings for hot rolled coil were done in January at around $730-740/t fob India and in February at $830-870/t fob India. There majority were destined to Turkey, the Gulf Cooperation Council and Europe.

Hard coking coal quotes are currently hovering at around $670-675/t fob Australia.

Sayed Aameer India