"There is a compelling case for steel prices to move up by around Rs 1,000 per tonne in the coming months as NMDC has hiked iron ore prices and the peak season charges imposed by the Railways," Rashtriya Ispat Nigam Commercial Director T K Chand told PTI.
Noting that NMDC had hiked iron ore prices by Rs 200 a tonne earlier this month, industry officials said this will translate into a Rs 320 per tonne hike in steel production cost as roughly 1.6 million iron ore is required for producing one tonne of finished steel.
In a double-whammy, the Railways has decided to levy its annual busy season charge on freight which will increase the rates by 15% between October this year and March next.
According to industry officials, transportation cost for iron ore will be increased by over Rs 300 per tonne for steel companies.
"I think, some of the cost will be passed on to the end consumer," Chand said.
An official from a private sector steel company also echoed similar sentiment.
"Of course, our production cost will go up following this. But, it is difficult to say how much of that increased cost will be passed on to end-consumers," said the official, who didn't wish to be named.
When asked whether the market will be able to absorb any hike in steel prices at a time when demand is subdued, Chand answered in the affirmative saying the market will be able to do so as demand is likely to improve from next year.