The country’s leading steel producers have devised a new strategy to pass on rising raw material costs to the end users without raising prices.
Companies are now levying raw material surcharges while keeping the base price unchanged.
“We have put a raw material surcharge of Rs 5,000 a tonne on hot-rolled coils (HRC) with immediate effect to pass on the 200 per cent increase in coal prices,” said Seshagiri Rao, director (finance), JSW Steel.
Ispat Industries and Essar Steel have imposed a similar surcharge.
“Since there is pressure from rising raw material prices, we have decided to pass on part of that increase by means of a surcharge. As and when raw material prices come down, the surcharge could be reduced or withdrawn,” said industry sources.
Hot-rolled coils are primarily used to make pipes and have many direct industrial and manufacturing applications, including the construction of tanks, railway cars etc.
The government may soon announce a slew of measures including an export ban and an excise duty cut to bring down prices of steel and steel products.
An increase in its prices, therefore, could pressure the margins of these industries and compel them to raise product prices.
The contract price for coking coal has increased from $98 to $300 a tonne with effect from April 1, while the iron ore price has gone up from $52 to $86 a tonne.
Scrap prices have also gone up from $450-475 a tonne to $550-575 a tonne. All these changes together imply a $300-350 increase on every tonne of input cost, especially for those who have no captive resources in coal and iron-ore.
Following a meeting with Steel Secretary R S Pandey last week, steel producers had announced a price-cut of Rs 2,000 a tonne on long products. However, no change was made in HRC prices.
“The input cost of HRC has gone up enormously over the last one year. While the cost-push is in the range of Rs 12,000 to Rs 15,000 a tonne, the price increase is only Rs 7,000 to Rs 7,500 a tonne. The producers are watching the domestic and international situation,” Pandey said after the April 3 meeting.
Steel (including iron) has a weight of 3.64 per cent in the wholesale price index. The Inflation rate for the week ended March 22 touched a 40-month high of 7 per cent.
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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