High input costs could cause recession: Ratan Tata

by Dave

Business Standard

Iron ore prices have increased by 85 per cent in the last year, while coking coal prices rose 200 per cent.

The global steel industry also faced pressure on their margins from the rise in costs, but these increases were absorbed by the market through steel price hikes, said Tata at the annual general meeting (AGM) of Tata Steel today.

“In the immediate future, steel prices will be dictated by the level of iron ore and coking coal prices, which continue to rise unabatedly. Unfortunately, most of the iron ore resources are controlled by three powerful international mining companies. They control about 70 per cent of the global iron ore and mineral resources whereas the 10 largest steel producers would account for only about 28 per cent of the total global steel output,” said Tata, who also heads the Investment Commission set up by the central government.

However, Tata stressed that steel would continue to be the foundation of economic activity as no construction could happen without steel.

“Demand for steel in the developing world will continue to be an important engine of growth. Internal demand for infrastructure and construction needs will continue to grow substantially in the years ahead in China, India and Brazil,” said Tata. The Indian economy, which is among the fastest growing in the world, would need an investment of $500 billion in the next five years to develop infrastructure.