Indian integrated steel producers have been prompted to maintain domestic prices, while unofficially offering small discounts to bulk customers.
KOLKATA: Price convulsions that the steel industry passed through in 2006 seem to have been carried forward to the New Year.
Weakening of the US steel market and the highest Japanese production in the last 34 years have dampened expectations of 2007 starting with consolidation of steel prices.
As a fall out, Indian integrated steel producers have been prompted to maintain domestic prices, while unofficially offering small discounts to bulk customers to rein in the pile up at the stockyards.
In fact, a contrarian price movement has emerged in China and developed economies in the New Year.
Higher exports and de-stocking by Chinese steel producers have triggered hardening of hot rolled (HR) coil prices in domestic market by around 7.3% at $ 449 per tonne.
In the eleven months of 2006, China’s net exports stood at 28 million tonne and even though the Chinese government has withdrawn export incentives, analysts forecast total exports in 2007 to be higher than previous calendar.
And the very same increase in Chinese exports has weakened US steel markets, where HR coil prices moved down to $450 per tonne, losing 5.3% over December prices.
Steel sheets, used by auto and appliances sector, too moved down 5.3% at $535 per tonne, compared to $ 565 per tonne in November 2006.
The mood in the global steel markets has also been sobered by Japan’s steel production, forecast to touch a record, 120 million tonne in 2007.
This is the highest since 1973, when it produced 119 million tonnes, while in 2006 the country’s steel plants produced 116 million tonnes. Higher Japanese steel production has been principally driven by high off-take of steel sheets by Toyota Motor Company and Mitsubishi Heavy Engineering Company.
Of course, the Indian market started the year with demand and supply reported to be evenly poised, but steel firms are keeping a close watch on Chinese steel landing on the shores.
Till now, imports from China have been a meagre one million tonnes of the total 28 million tonnes exported by the dragon. Officials in Tata Steel and Steel Authority of India (SAIL) said that Chinese imports have been low since the product shipped out of that country have been commodity grade, of which there are sufficient supplies at competitive prices in the domestic market.
However, the officials said this can change fast since the Chinese government has laid out a strategy of increasing exports of value added steel and the Chinese steel companies are very nimble in changing the export product basket in which case Indian customers could be lured to import their requirement in the coming months.
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