- 22 Mar 2022
- ICICI Securities
Steel players may use force majeure to call for fresh contracts
News: As per media sources, some Indian 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. Iron ore, which was around $86 per metric tonne in January 2021, is now $154 CFR China including freight. Coking coal has risen to $700 FOB Australia in March 2022, from $300 in January 2021.
Views: Due to the geopolitical situation, global steelmakers - especially from Germany and the UK -have increased prices sharply by ~25%. Indian steelmakers anticipate a similar situation. Steel companies have also indicated that they are trying to hike prices to offset the rise in coking coal price. However, if the situation persists and prices do not cool down, there may be production cuts
Impact: Neutral