STEEL PRICES: Mahindra increases tractor prices, autos next?

Steel prices are up 40-45% this year

Mahindra & Mahindra, one of India’s largest makers of tractors, said it plans to increase the prices of its tractors from January 1 to offset increasing commodity prices.

“Details of the price increase across different models will be communicated in due course,” it said.

The move comes in the wake of record sales of tractors in recent months as demand remains firm despite a weakness in the overall economy due to COVID-19.

Mahindra had sold 31,619 tractors in November, up from 20,414 last year, due to heavy demand.

“Demand continues to be robust fueled by an excellent festive season with retails being strong during Dhanteras and Diwali. Rural sentiments remain positive on account of higher Kharif output and Rabi sowing,” it had said.

Meanwhile, steel prices have been rising globally, and are up around 25% this year so far.

However, they have risen by about 40-45% in India, partly because prices were below global levels, but have caught up in recent months due to exports.

Lower production of steel due to COVID-19 restrictions have also added to a crunch in supply, aiding pricing increases.

Besides tractor makers, the rise in steel prices has hurt makers of auto mobiles, machinery as well as other sectors such as real estate.

Real estate players, on Friday, wrote to PM Narendra Modi urging him to take steps to bring steel prices under control.

Real estate developers’ association Credai alleged that there was cartelization in the steel industry, and urged the government to block steel exports.

“With a continuous and sudden upsurge due to cartelisation in the prices of steel, cement and other raw materials, real estate developers are experiencing an inevitable increase in construction cost and are faced with a situation that will create a delay in delivery, stalling of projects in some cases, thereby impacting the homebuyers at large,” it said in its letter last week.

It alleged that steel prices have increased from Rs 40,000 per ton at the beginning of the year to Rs 58,000.

It remains to be seen if automakers too announce an increase in prices. Many automakers have resisted the temptation to increase prices, keeping in mind the fragile nature of demand in the market.