JSW Steel plans to levy surcharge on sale of steel products

To balance the soaring input cost, domestic steel giant JSW Steel is proposing to levy a surcharge on steel products to its long-term OEM (original equipment manufacturer) customers, as per a top company authority.

JSW Steel will be the first firm to bring in the idea of surcharge to the domestic steel market.

Seshagiri Rao, Joint Managing Director and Group CFO, JSW Steel, told the media that there is immense pressure on the production cost. The rate per tonne steel production surged by 19% or Rs 6,600 per tonne quarter-on-quarter in July-September 2021.

The cost of coking coal -- a key steelmaking raw material for which players remain reliant on imports, has similarly surged from $120 a tonne to $400 a tonne in merely four weeks.

When asked whether the firm is considering passing on the burden of enhanced raw material and production value to its customers in the form of duty or surcharge, he answered in surety.

The coking coal prices surged by four times from $120 per tonne to $400 a tonne in just the past four weeks. Thermal coal costs have increased.

The surcharge concept would be new to India but it is not new in the global markets, he said.

Responding to a question if it would be possible to levy a surcharge on the sale of steel products in the high price-sensitive Indian market, the official told the media that JSW Steel will take its customers into confidence for this new idea.

Rao further said that there are three parts where the sales are made. The segments are particularly retail, exports and the OEM (original equipment manufacturer) customers.

In the retail segment, there is already a cost fluctuation on a regular basis, so the surcharge idea would not work in this section, and in the exports, costs rely on several other markers.

The third segment is OEM customers with long term relationships, where it is feasible. The idea has to be explained to them.

Image Source

---

Also read: JSW Steel to cut down carbon emissions by 23% till 2030