Auto component firms seek curbs on steelmakers citing unjustified price hikes

The auto component industry, one of the largest users of the commodity, has been facing a myriad set of problems from rising Chinese imports to declining exports due to rupee appreciation. The fresh round of steel price increases which in some cases like carbon steel is as much as 49 per cent since November 2007, have left them even more vulnerable.

“Our main competition is with China and we are at a huge disadvantage on raw material costs. The Chinese government discourages export of raw materials like steel and iron ore while they have identified auto components as a major export potential,” said Association of Indian Forging Industry (AIFI) president Vidyashankar Krishnan. “There is an urgent need to step in and restore parity or else the auto component growth story that everybody keeps talking about will go haywire.”

While the industry is stopping short of using the R (regulator) word, there is unanimity that incentives for exports like in the DEPB scheme should be done away with for steel. “I am a strong believer in market dynamics so will not like a regulation of prices or imposition of an export duty. But with the same argument there is absolutely no ground for subsidising steel exports and instead it is the import and excise duties that should come down,” said Labroo.

The impact is already visible in the balance sheets of some of the auto component companies. “We keep analysing the financial performance of 50 auto component companies on a quarter to quarter basis and for there is going to be bloodshed in this quarter (ending March 31) especially for steel using companies,” said ACMA executive director Vishnu Mathur. “Even in the previous two quarters profitability was down and in December average PBT had declined by 60 basis points.”