A month before monsoon, steel makers have increased prices of long products, mainly used in construction by Rs 1,000 per tonne on sustained demand from projects, but have rolled over prices of flat products used in automobile on weak demand.
"All leading steelmakers including Tata Steel and SAIL have hiked prices of long products by Rs 1,000 per tonne this month. SAIL may even take one more increase as there is a shortage of long products in the market," a leading distributor of long steel products in Mumbai said.
TMT bars (One of the widely used long products) of 8mm and 10 mm are available for Rs 48,000 per tonne and Rs 46,500 per tonne after the increase. While 12mm to 32mm TMT bars are available for Rs 46,000 per tonne, the distributor said.
Demand for long products is generally peaks in months before monsoon as projects are on full swing. Steelmakers try to take as much hike as possible in May as it is the last month before monsoon when demand plateaus.
"Construction and projects are likely to keep demand for longs alive. Secondary steel TMT producers have also increased prices by Rs 500/tonne for May. Expectations are that the new government will approve infrastructure projects which would further drive the steel demand in the country," Prakash Duvvuri, head of research, OreTeam said.
A SAIL official, who did not wish to be named, told dna that his company was trying to get an another increase of Rs 500 per tonne across the board in long products.
"In some cases when customer is not able to afford the hike we may adjust, but we are trying to get an increase this month, as last month we could not get a very huge jump," SAIL official said.
Steel distributors are in fact expecting one more hike in long prices if there is a delay in monsoon. The SAIL official agreed that there was an optimism among customers.
"There could be an increase in steel prices more out of hope of positive election results. However the increase would be in reasonable limit of Rs 500-1,000 tonne," he said.
Steelmakers had taken a marginal hike of Rs 500 per tonne in April. Prices of flat products, on the other hand, were cut in March due to fall in international prices and rupee appreciation.
"Long prices are expected to remain stable with an upward bias on construction demand while a downward bias is expected in case of flat products. However, I don't see any further opportunity of price hike in longs as steelmakers have been increasing prices for almost four months now," Giriraj Daga, senior analyst with Nirmal Bang Securities, said.
Demand for passenger vehicle continues to remain slow in the country following overall slowdown and rise in fuel prices. Car sales of all leading automobile manufacturers fell in April from the year-ago period.
"Flats require more support to move up. Automobile demand is stable and imports of flats are still consistent due to the better currency rates, hence it would take time for flats to pick up," Duvvuri said.
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.