Indian steel firms have started selling products directly to small buyers to help save costs, as part of their commitment to keep prices down and stave off inflationary pressures, company officials said.
While steelmakers themselves would be unaffected by the move, small and medium enterprises (SMEs) who have been forced to buy through middlemen because of the smaller size of orders may save between 20 percent and 25 percent of their costs, they said.
About 5 percent of hot-rolled products are marketed through retailers who buy from the steel companies at the same price as major buyers and sell it to SME consumers at a marked-up price.
"The ultimate beneficiary (of the current system) is the middleman. As a support to the government to fight inflation, we are selling directly to the end-consumers to ensure they get the right price," a senior official at JSW Steel Ltd (JSTL.BO: Quote, Profile, Research) said.
Steel firms promised to take steps to fight inflation last week including reviewing trading arrangements and setting a maximum retail price, the government said in a release last week.
Other steps include advertising the price and facility for small buyers to buy through the internet, the government said.
JSW Steel Ltd (JSTL.BO: Quote, Profile, Research), India's third biggest producer, said in an advertisement on Monday it will make up to 10 tonnes steel available to actual users through its warehouses across India.
Ispat Industries Ltd (ISPT.BO: Quote, Profile, Research), which supplies around 90 percent of its output directly to re-rollers such as Bhushan Steel (BSSL.BO: Quote, Profile, Research) and Uttam Galva Steels (UTTM.BO: Quote, Profile, Research), recently started direct marketing to the SMEs.
"Now, we are catering to small customers directly. We directly process their requests online. This is to ensure price transparency," an Ispat spokesman said.
Prices of steel, used in construction, auto parts, engineering goods and heavy equipment, have risen by a third in India and doubled globally.
Tata Steel Ltd (TISC.BO: Quote, Profile, Research), world's sixth biggest producer, sells only 20-25 percent to retailers and has no plans for direct retail sales. Jindal Steel & Power (JNSP.BO: Quote, Profile, Research), part of $8 billion Jindal group, said it doesn't have any such plans "as of now."
Shares in steel companies were firm on Monday in a strong Mumbai market with JSW Steel rising as much as 6.99 percent to 804.80 rupees and Ispat up 5.57 percent at 21.80 rupees. Tata Steel was up 2.3 percent at 658.35 rupees.
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