Steel companies may go for another round of price hikes in November-December as rising demand, low inventory levels and falling supplies are set to keep the rates firm.
Domestic steel manufacturers this month increased flat product prices by Rs750-1,250 per tonne to around Rs39,500 per tonne on account of firming up of demand globally and a slight surge in raw material costs.
Experts said there is still some room for further hikes, though not as high as in April, when the firms increased prices by around Rs2,500 per tonne to around Rs41,000 per tonne due to severe pressure on margins.
Price of iron ore had shot up to $186 per tonne while coking coal was quoting at $225 per tonne in April. The current prices of iron ore and coking coal stand at $144 per tonne and just over $200 per tonne, respectively.
Iron ore and coking coal are the primary raw materials for the manufacture of steel. To produce a tonne of steel, close to 1.86 tonne of iron ore and 0.8 tonne of coking coal is required.
Steel prices were hiked thrice in the last year, the highest being in April, and were reduced in May this year.
“April was more like a bubble so the prices may not go as high again, but they would remain firm, at least for a quarter, and then they might increase a bit,” said Prakash Diwan, head - institutional business, Networth Stock Broking.
He said the supply from China is coming down and some steel plants in Europe are closing down for maintenance which would increase the demand for products. Besides, the domestic price rise has not been so sharp.
“While over-capacity had forced us to reduce prices, now the inventory levels are under control and stock overhang is also not there, but whether there will be another fresh round of price-hike or not, that we will have to see,” said Vikram Amin, director, Essar Steel, adding there was a positive trend in the market.
Ravindra Deshpande, analyst with international brokerage firm Elara Capital, said, “Steel exports from China have come down as it has cut domestic production. Hence, the supply in the international market will reduce, thereby triggering a rise in demand.” However, this has partially been factored in the current price hikes, he said, adding there will not be any significant input cost pressure as both coking coal and iron are prices are expected to come down in future.
“Therefore, any change in the international demand-supply situation will govern the prices in future,” Deshpande said.
A commodities analyst said the domestic construction season starts from September, especially the housing sector. “This would translate into a stronger market for steel products in India, too,” he said.
However, Nitin Johri, director - finance at Bhushan Steel, which increased prices of its value-added products by around `1,500 per tonne, said that further hikes will depend on raw material prices.
He said the companies will see how the current hike is absorbed by the market and take a decision on further hikes in the due course.
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