JSW Steel plans to levy surcharge on steel products as input cost rises

New Delhi : To offset rising input costs, domestic steel giant JSW Steel is planning to levy a surcharge on the sale of its steel products to its long-term OEM (original equipment manufacturer) customers, according to a top official of the company.

JSW Steel will be the first company to introduce the concept of surcharge in the domestic steel market.

There is a huge pressure on the cost of production. The cost of steel production per ton increased by 19 percent or 6,600 per tonne quarter-on-quarter in July-September 2021, said Seshagiri Rao, joint managing director and group CFO, JSW Steel.

He told PTI in an interview that the rate of coking coal – a major steel-making raw material for which players depend on imports – has risen from $120 a tonne to $400 a tonne.

When asked whether the company wants to pass on the burden of increased raw material and production cost to its customers in the form of duty or surcharge, he replied in the affirmative.

“We are working on (some of) what is happening globally. Coking coal prices have increased four-fold from USD 120 per tonne to USD 400 per tonne in the last four weeks. Thermal coal prices soared Huh.

Rao said, “Such volatility is very difficult for a steel company to absorb. If we look at Europe, a steel company has imposed a surcharge of 50 euros and in the UK, a steel company has imposed two surcharges of 25 pounds. surcharges have been introduced.” Explaining the reason behind this move.

The first is charging €50 as an energy surcharge, while the second is charging £20 as an energy surcharge and £5 as a transport surcharge, he said without naming the entities.

He said that the concept of surcharge will be new to India but it is not new in global markets.

Responding to a question whether it would be possible to levy a surcharge on the sale of steel products in the highly price sensitive Indian market, the official said JSW Steel will take its customers into confidence for this new concept. “We are also looking to discuss this with our customers due to volatility (in the market).”

Rao further said that there are three segments where sales are made. There are segments namely Retail, Export and OEM (Original Equipment Manufacturers) customers.

Prices already fluctuate on a daily basis in the retail segment, so the surcharge concept will not work in this segment, and in exports, prices depend on many other markers.

“The third segment is the OEM customers who have long-term relationships … there it is possible. The concept needs to be explained to them,” he said.

Rao, however, did not elaborate on the amount that would be levied as surcharge, but said it would be proportional to “higher raw material prices”.

There will be a basis. If raw prices go beyond this, surcharge will be calculated accordingly.

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