Highway construction companies have urged the government to impose curbs on the export of steel, saying domestic prices of the commodity have surged, inflating the cost of projects.
Industry experts said the capital cost of highway projects could rise by up to 10 percent on the back of surging steel prices and emerge as a serious constraint in the months to come. The impact could be large on the highways and infrastructure construction sectors which are estimated to consume about 65 percent of the steel produced in the country.
“The government can stop steel exports for a short while because companies are exporting maximum production..,” said Vinod Agarwal, president of National Highways Builders Federation.
According to Agarwal, exports have become lucrative as international prices remain firm, which, he said, is impacting local supply.
Market watchers said the increase in project cost will depend on the quantum of steel used, bridges, and structures in the project.
Dinesh Chandra Agarwal, managing director of Ahmedabad-based DR Agarwal Infracon Pvt. Ltd., said, "The government should, on a priority, look at controlling exports of steel, because the highways construction sector, which generates high levels of employment, supports the economic, is getting impacted because of rising steel prices."
Domestic flat steel prices trended higher in May than a recent steel sector report from Care Ratings.
Vinayak Chatterjee, chairman of Feedback Infra said, “International market is moving up for steel. By definition, these are market-driven prices determined by the global forces and the government has a limited role to play in this.”
The ministry of road transport and Highway, however, is worried about cartelization. Nitin Gadkari, the minister for road transport and highways, had recently written to the Prime Minister’s Office regarding alleged cartelization in the steel sector.
India is dependent on iron ore imports, the prices of which have been driven by high consumption in China.
According to Arindam Guha, partner at Deloitte India, raw materials account for about 60 percent of steel production.
Of late, higher international prices have encouraged Indian miners to step up exports, the report by CARE Ratings said. In FY21, India exported 57.7 million tonnes of iron ore, of which 52 million tonnes were shipped to China.
The recent surge in Covid-19 cases in the country led steel companies to produce liquid medical oxygen, which is likely to impact steel production, as per market watchers. However, the yearly production by local steel companies is expected to witness 9-11 percent growth despite the impact of Covid-19.
“The issue of medical oxygen has only started now; prices have been increasing for the past one year,” said another industry executive, who did not wish to be named.