Home » Money

Steel prices to remain stable in April amid weak global demand

Monday, 24 March 2014 - 9:55am IST | Agency: DNA

Falling international steel prices, drop in domestic iron ore prices and recent appreciation in rupee that made imports attractive may force steelmakers to either cut steel prices or keep prices unchanged in April.

Steel manufacturers and distributors confirmed that after three consecutive price hikes since January, steel prices are unlikely to rise in April.

"The input cost continues to remain firm. The price levels in India are in line with global prices and in some cases lower than import parity prices. The demand is stable. Hence the prices will continue to remain at present levels," a spokesperson from Essar Steel said.

RK Goyal, managing director of Kalyani Steels, too agreed that probability of steel prices remaining at current levels in April are high as demand continues to remain subdued. Another steel major having strong presence in southern and western India said that previous price increases were absorbed by the market but now the prices would remain stable.

"In absence of new projects and softening global prices, I see 50% possibility of rollover and 50% possibility of price cut going ahead," said Giriraj Daga, senior research analyst with Nirmal Bang.

Steel prices across the globe, barring the US, have remained under pressure because of excess supply, Daga had observed in a research report which was published at the beginning of March.

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.

Prices of key raw material, iron ore, have begun to moderate in March after witnessing sharp rise in the beginning of January-March quarter. While domestic demand is intact, international prices have plummeted to its lowest in eight months to $117-118 per tonne, primarily due to subdued Chinese demand.

State-owned NMDC, which is one of the major iron ore supplier in the country, has kept the prices of lump and fines unchanged in March due to falling global prices. Even at e-auctions in Karnataka, ore prices are likely to fall by 15-20%, following poor off-take from steelmakers amid extremely high ore prices, a source from the mining industry said.

January-May is usually the peak season for steel demand as construction activity are in full swings and several projects are on completion stage allowing steelmakers to take maximum hikes. In past three months steelmakers have taken an approximate hike of Rs 1,000-1,200 per tonne on long products like TMT bars, D Datta, Indu Corporation, a leading distributor of long steel product in Mumbai said. Prices of flat steel has almost remained same.

Unlike others, Datta is hopeful that steelmakers would take a minimum hike of Rs 500 in next month as now only two months are left for the end of peak steel season. An official of steelmaker having a plant in southern state said that despite three consecutive hikes long product prices were still lower by Rs 3,000 per tonne when compared to April 2012 prices while flat product prices were at same level.

He expects steel demand growth to remain closer to gross domestic product growth in next fiscal.

Steel consumption has largely remained flat in current financial year. According to a 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.

Most industry participant noted that steel demand was likely to remain subdued going forward. "Even after election if stable government forms at center, it will not immediately translate in to investment. Real effect of new government will start reflecting only after September, thus no major investment is seen in next six months at least," an Essar Steel official said. Since the beginning of March, rupee has appreciated around 2%.


Jump to comments