Home »  Money

Steel companies cut flat product prices to battle imports

Wednesday, 2 April 2014 - 8:50am IST | Place: Mumbai | Agency: dna

But hike long product prices as demand continues to remain strong in peak construction season

Recent appreciation of rupee and falling international steel prices have forced steelmakers to marginally cut prices of flat product like hot-rolled coil (HRC) in order to stay competitive with cheaper imports.

The companies, however, are planning to increase prices of long products, especially TMT (themo mechanical treatment) bars as its demand continues to be good.

Essar Steel, which only produces flat products, will marginally lower prices of some commodity grade flat steel in April mainly due to rupee strengthening, a company spokesperson said without divulging details of the price cut. Another major steel company in western region has also cut HRC price by Rs 500-750 per tonne.

On the other hand, prices of long product TMT bars are likely to be increased once more this month.

"When you start the year, you want to create a positive impact. SAIL would like to get better price for TMT bars in April, so prices are likely to be increased. Prices of structural products, however, may not see much change," a SAIL source told dna.

Tata Steel is also likely to increase the price of TMT bars by Rs 700-1,000 per tonne this month as demand for long products continues to remain good, a leading distributor of long products in Mumbai said.

January-May is usually the peak season for steel demand as construction activity is in full swing and several projects are on completion stage, allowing steelmakers to take maximum hikes. In past three months steelmakers have taken a hike of Rs 1,000-1,500 per tonne on long products like TMT bars. Flat product prices, on the other hand, have remained stable.

Flat products, mainly used by automobile and white goods industry, form a major portion of imports; while TMT bar, mainly used in construction industry, is largely a region-specific product. Hence, international price and rupee movement do not have much impact on TMT bar prices, said Giriraj Daga, senior analyst with Nirmal Bang Securities.

"Long product prices can be sustained over next two months, as before monsoon construction activities are at their peak in April, May. Flat price had to see some correction to remain competitive against the import parity price," Daga said.

Steelmakers confirmed that long product order book has improved due to demand from construction sector. Despite having near flat consumption in the last fiscal, steel companies are expecting demand to increase by 5-6% this fiscal in line with project GDP growth of the country.

Steel consumption has largely remained flat in 2013-14. According to the Joint Plant Committee data, Indian steel consumption has grown only 0.5% in April 2013-January 2014, making it the lowest growth rate in the past 10 years and second-lowest in the past 15 years.

Steel prices across the globe, barring the US, have remained under pressure because of excess supply.

In China, which has been witnessing drop in steel consumption, prices have fell to their lowest level in more than eight years in mid-March. Chinese steel prices fell to $541/tonne on March 13 from $575/tonne on January 2.

Since the beginning of March, rupee has appreciated around 3%, or by Rs 1.87 to 59.89 against dollar.

Jump to comments

Recommended Content