Some Indian steel companies have been planning to enforce the "force majeure" clause to renegotiate contracts with their customers after the global eco-political situation due to the
Russia-Ukraine war has meant a spike in raw material prices, according to a report in
Economic Times.Coking coal prices have seen a sharp hike due to the war. As coking coal is an essential input for the production of steel, Indian steel companies are now in a quandary as a large part of input requirements are met through imports. VR Sharma of JSPL, expects the
steel market to only improve over the next 6-8 months.
However, what does this mean and has such an action been taken earlier? Here are some basic questions explained.
First up, by how much have prices been raised by steel companies?
Steel stocks are in focus on the back of reports of rebar and hot-rolled coil price hikes by sector heavyweights.
CNBC-TV18 has learnt that the price hike has been roughly about Rs 1,500 per tonne. They have been undertaken by JSW Steel, JSPL as well as SAIL.
So, what is "force majeure"?
Steelmakers are planning to invoke the force majeure clause and renegotiate short and long-term contracts with customers following a surge in raw material costs, including coking coal prices.
Has such an action been taken earlier?
Domestically, such an action has not been taken at least in the past decade.
Why are the steel companies forced to consider implementing this?
Because they are not getting required price increases and input costs have spiked substantially.
How will it impact their order books and stock prices?
Steel companies don't give out order book details but stock prices will most probably go down.
Most importantly, how does it translate for the common man?
If such measures are taken, it will result in lower supply in the market which will drive up prices of final products like cars and white goods.
With inputs from Nigel D'Souza, who tracks the sector closely for CNBC-TV18
(Edited by : Abhishek Jha)
