The rapid increase in steel prices over the last few months is starting to cool off due to weak demand, a temporary phenomenon.

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Industry experts and analysts believe that prices may soften in June as the demand is weakening due to the cyclical monsoons. Moreover, with jitters in the global economy returning, steel prices across the world, especially Europe, has started to ease.

Last week SAIL chairman, S K Roongta said, “In the last three to four weeks, global steel prices have weakened to the extent of $80 -100 per tonne. It is a natural phenomenon that if prices in international markets reduce, steel prices will be impacted in India also.”

Steel secretary Atul Chaturvedi said, “Prices of steel are likely to come down in June due to softening demand in the international market, mainly due to European crisis. The onset of the monsoon will also have its impact on the prices as construction activity slows down during this period.”

Steel prices in India are currently ruling in between Rs 26,000 to Rs 30,000 per tonne and are expected to ease off from June. Tata Steel, however, sees no impact on steel prices and believes that prices will remain stable. Koushik Chatterjee, group CFO, Tata Steel, last week, said that the steel prices are expected to remain stable at current level. He said, “We don’t see prices going down from these levels as higher raw material costs (coking coal) kicks in from this quarter.” Giriraj Daga, research analyst, Khandwala Securities said, “In June there could be a price correction of Rs 1,000-1,500 per tonne, primarily owing to the pressure on demand.”

He said that India is more affected by price fluctuations in China as its easy for the country to dump steel in India. He said, “Prices in China have corrected by 10-15% and that might lead to price correction in India. However, as the $200 per tonne coking coal price contracts kick in from July, steel prices will inch up again.”

Ravindra Deshpande, analyst, Elara Securities (India) said, “I don’t see a reason why steel prices will go down. If we see, even after the judicious use of its resources and improved product mix, SAIL’s margins have dipped by 1%. Therefore, a price cut will mean further erosion of margins. However, if SAIL, which is the largest steelmaker in India, decreases prices, then other domestic steelmakers too will have to follow suit.” Deshpande, however, agreed that steel prices for the benchmark hot rolled coil have come down by $10-15 per tonne in the European market week on week.