For Immediate Release

Builder’s Association of India Warns against Rising Steel Prices

Mumbai, 11 April 2008

Builders Association of India has warned that the rising steel prices are ensuring that the Aam Aadmi’s dream home remains a dream. The problem is compounded due to rising cement prices and shortage of other construction materials.

To dwell upon this and other related matters, builders and contractors from across Maharashtra held a meeting on Friday 11th April, 2008.

Preparation for Commonwealth Games in jeopardy

Says Mr Mahesh Mudda, Chairman – Mumbai Chapter of Builders Association of India, “The northbound steel prices have put in jeopardy the Indian Governments grandiose plans for the Commonwealth Games 2010. Central Public Works Department (CPWD) one of the executing authorities for the construction works related to the games has not received any bid for two of its tenders floated in the last ten days.”

In a meeting convened by Builders’ Association of India (BAI) in New Delhi on 2^nd April 2008 and attended by representatives of Confederation of Real Estate Developers Association of India (CREDAI), Construction Federation of India (CFI), Construction Industry Development Council (CIDC), MES Builders’ Association of India (MESBAI) and National Highway Builders Federation (NHBF), it was pointed out that the steel companies are arbitrarily jacking up the prices. They pointed out that the prices have been steadily increasing since 2003 as follows :

Construction industry consumes 33% of total steel produced in the country in terms of TMT Bars, rods and structural steel.

The major five integrated steel plants control 65% of the total steel production in the country. They have formed an Association in 2001 called ‘Indian Steel Alliance’.

Periodical price increases affected by the steel companies are almost identical or moving within narrow range during all these years. This leaves room for doubt that steel producers are ‘acting in concert’ and have reached an understanding to bring about ‘pricing discipline’.

To buttress their doubt, BAI points out that five major steel manufacturer’s control 65% of the total steel production in the country. Out of these five, only three produce steel bars, rods and structural steel called ‘long products’. They procure their main raw materials such as iron ore & coal as below :

All of them import balance requirement of coking coal from Australia, Africa, Indonesia and other countries. Thus, each of the plants has different production costs. But still it was observed that, the sale price of steel producers is by and large uniform despite different production costs.

Construction industry contradicts steel lobby’s argument that the increase in price of ‘long product’ is due to demand-supply mismatch. To further their argument they point out increased housing activity and the National Highways construction. Construction industry feels that the National Highways Development Project has been an on-going scheme since 2000 and the housing and real estate sector boom started showing increased activity from 2002 onwards.

Further, Production and consumption data published in December 2007 issue of ‘JPC Bulletin’ of the Joint Plant Committee, negates their argument about demand-supply mismatch.

Comparative Statement of Production, Import, Export of Steel Bars and Rods

including Consumption

(Figures in thousand tonnes)

Central Statistical Organisation data released recently shows that growth in the construction industry is slowing down since last three years, from 16.5% in 2005-06 to 12% in 2006-07 and to 9.6% in 2007-08.

Central Statistical Organisation Growth Data of various economic activity

constituting GDP as on 1^st February 2008

Having seen that their argument of demand-supply mismatch has no takers, steel companies are now crying hoarse about increase in input costs.

Construction industry contradicts this argument by highlighting the healthy operating profits of steel majors.

Fiscal year wise Comparative Statement of Operating Profit of integrated Steel Plants

Figures in Crores

The construction industry fears that if corrective steps are not taken immediately by the works authorities, such as NHAI, DDA, PWD’s, Railways and CPWD, then the virus of non-tendering may spread across the country.

Construction industry suggests that :

1)      Allow duty free imports, on items such as cement.

2)      Ban exports of steel

3)      Reimbursement of the increased steel price based on SAIL rates published from time to time for ongoing and upcoming projects.

4)      Request Director General of Intelligence & Research to enquire into the causes of unprecedented steel price increase from 2004 till March 2008 and more specifically after the Union Budget 2008.

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