8 Dec 2008, 1445 hrs IST, REUTERS

MUMBAI: Steel is set to be cheaper by 1,100-1,800 rupees a tonne as steelmakers have decided to pass on the entire benefit of the excise duty cut to customers.

The federal government, on Sunday, unveiled a slew of measures, including a 4 percent cut on excise duty on steel and its products.

"The reduction is 4 percent which amounts to a fall of 1,100-1,800 rupees (per tonne) depending on value-added products," Sharad Mahendra, associate vice president of sales and marketing of JSW Steel said.

Cold-rolled steel prices will fall by about 1,000-1,200 rupees a tonne, Nittin Johari, chief financial officer of Bhushan Steel Ltd said.

The firm is now also considering reviving output on hopes the government's stimulus package will boost demand for the alloy, he added. Other steel firms such as Ispat Industries and Uttam Galva will also pass on the excise cut to their customers immediately, they said.

Shares in steel firms such as JSW Steel, Tata Steel, Steel Authority of India and Jindal Steel and Power rose 4-9 percent on Monday on hopes demand will improve if prices fall. "Excise duty cut means further downside for steel prices with no change in the profitability of companies," Pawan Burde, senior analyst at Angel Broking said.

Steel makers will not revive production immediately as inventories with them were still very high, Burde said. "The major worry still is demand. This step will not boost consumption but will only provide some support to falling demand.